A No Credit Check Loan is a loan that is taken for a relatively smaller amount of money. These are generally unsecured loans and are for people who often have a poor credit score or possess a low credit score. The term no credit check literally means that the institution which is lending does not check the credit score of the borrower before they issue the loan.
Features of No Credit Check Loan
- No Credit Check Loan has some distinctive features:
- The loan is granted to the borrower irrespective of the loan history of the person who applies for the same.
- The no credit check loan has a faster approval process in comparison to other such loans.
- The rate of interest is usually higher on no credit check loan as compared to other loans.
- The loan has a flexible tenure period.
- The no credit check loan is available for higher loan amounts.
Advantages of No Credit Check Loan
- Quick Approval Process: Financial institutions or banks who often lend the no credit check loan handle this entire process at a faster pace. The person who borrows the no credit check loan does not have to present a different kind of documents so as to fasten the processing of the no credit check loan. Thus, the process of loan approval gets faster at a natural pace.
- No possession for the loan: Another distinctive advantage of no credit check loan is that the borrower of the loan does not have to offer anything as collateral for the loan. The borrower, in this case, is at minimal risk as they do not lose anything if they default in paying back the loan amount. The loser, in this case, is the lender as they have offered the entire loan without any collateral.
- Fixed interest rate: The lender of the no credit check loan always charges a fixed interest rate. The repayment options for the borrower are easier to manage as long as they have a fixed and regular income as the chances of defaulting on the loan amount gets nullified.
Disadvantages of No Credit Check Loan
- Bad Loan Terms: The lenders of no credit check loan provide the borrower with poor or bad loan terms which always charge a higher interest rate than the usual loan. The lender sets the loan terms according to their will and the borrower has to agree to the terms if they wish to avail this loan.
- Minimal Amount Loans: As these no credit check loans are offered without any collateral being at stake, the lenders often approve only a small amount of loans. The larger loan amounts are always considered risky by the lenders in such cases. The borrowers with good credit history can, however, expect big amounts of loans but these always come with a high interest rate.
- Short term loans: These loans are usually for short terms so that the vulnerability of the defaulters is reduced. The loan is offered for a period varying from a few weeks to a few months. It can extend to some years only when the loan amount is substantially higher. The term of the loan is set after an agreement is reached between the lender and borrower of the loan.
Eligibility for No Credit Check Loan
The no credit check loan is available to the following category of people:
- Salaried, non-salaried and people who are self-employed.
- Salary statement in case of salaried people is needed.
- The applicant should be able to meet the repayment requirements of the loan.
- Only Indian residents can apply for the loan.
- Some banks require an applicant to have a specified minimum salary for availing of the no credit check loan.
- The applicant of the no credit check loan must be of at least 18 years of age.
Interest Rate
The interest rate in no credit check loan is relatively higher and can vary from 12% – 30% depending upon the loan amount and the duration for which the loan has been taken. However, in case of no credit check loan, the borrower can choose to avail of either the fixed interest rate or floating interest rate.
| Fixed interest rate | Floating interest rate |
| The interest rate remains fixed in such cases. The EMI is the same every month and the borrower need not worry about any kind of fluctuation that might take place in the market. Thus, the borrower can plan their repayment strategy accordingly. | The interest rate in this case always fluctuates and is based on conditions in the market and policy level changes which the Reserve Bank of India might take occasionally. The EMI amount thus keeps changing and the borrower has to plan the strategy of repayment accordingly. |
EMI in case of No Credit Check Loan
EMI or Equated Monthly Installment is the amount that the individual has to pay every month so that the loan amount is repaid. This EMI is calculated based on the principal amount, tenure or the loan and rate of interest which the lender is charging. The below-listed factors affect the EMI that the borrower might have to pay:
- Principal Amount- The high amount loan generally has lower EMI while the case will be opposite in low amount no credit check loans.
- Interest Rate – The interest rates are of two types -Fixed and Floating. The EMI is constant in cases when the interest rate is fixed. The change in interest rate which usually happens in case of floating interest rate has its effect on the EMI and the amount might vary every month.
- Tenure of the loan– The loans which are generally taken for a longer period will have lower EMI amount.
It will be beneficial for the borrower to do some groundwork before they decide to take no credit check loan. Checking the EMI amount through the EMI calculator is one such step which will allow them to pursue the right course of action.
Read Also:Â Know About Bad Credit Loans
