Pros and Cons of No Credit Check Personal Loans

Borrowing money isn’t always easy – you may find it all the more challenging to secure funds if you have a bad credit score. But some lenders cater to people with low credit scores; all you need to do is find the right one. 

People with a low score often resort to high-cost short-term alternatives such as payday loans or no credit check loans to get by. While these options may give you access to funds quickly, the catch is that they’re entwined with high interest rates and grave repayment implications. So how does one choose a suitable loan offer? 

In this article, we’ll learn more about the pros and cons of no credit check loans and some handy tips to apply for them. 

Online loans – no credit check: How do they work?

A no credit check loan is a personal loan designed for people with a bad credit rating seeking credit without a formal credit enquiry. Borrowers with a low credit score often resort to these options because:

  • They fear that multiple hard credit checks will push their credit score further downhill. 
  • They’re afraid that the lender may deny their loan based on a hard credit enquiry. 

FCA authorised lenders always conduct a formal credit check before lending money to borrowers. This credit check gauges the borrower’s repayment capability, credit behaviour and overall financial standing. 

If you accept a preapproved loan deal offered by an FCA authorised lender, they will undoubtedly perform a hard enquiry on your credit profile. Most lenders decide whether or not they want to lend you money and at what interest rate, based on this hard enquiry. Now, this process is usually tough to get through for people with a low credit rating. 

This is where ‘no credit check’ lenders come in. No credit check lenders also carry out a hard credit enquiry. However, these lenders lend money to borrowers despite low credit scores. 

Unlike conventional lenders, no credit check lenders don’t let your credit score drive their lending decision. This is one of the key reasons borrowers with low credit scores find no credit check loans to be a convenient option. 

Although, it is critical to note that no credit check loans have soaring interest rates. Since there’s no gauge on the borrower’s repayment capability, the perceived risk proposition from a lender’s viewpoint is higher. As a result, lenders tend to set high interest rates on loans. 

Ease your loan search with FCA authorised loan brokers like Loan Princess by comparing personalised loan offers from multiple lenders. Loan Princess has a panel of FCA approved lenders providing lending solutions for people with a low credit score struggling to borrow money.

Borrowing small payday loans (bad credit) without a credit check

Payday loans are a type of high-cost short-term credit that you can borrow to get by a short-term financial crunch. These cash advances have faster disbursal times, and you can pay them off within a month. However, while payday loans may look like an expedient option, you might want to steer clear – these loans are replete with high-interest rates and grave repayment implications.  

The average APR of payday loans often exceeds 300%, with sky-high interest rates. To safeguard the interest of the consumers, the FCA capped payday loan prices. For every £100, the lender cannot charge you more than £24 for a loan with a term of 30 days. If you fail to keep up with your payments, the lender cannot impose a penalty of over £15, plus the interest on the loan amount. The price cap also ensures that you don’t end up paying more than twice what you borrowed.

The FCA’s intervention resulted in stricter regulations for HCST creditors. Plus, the number of payday lenders plummeted after the price cap implementation. Although, there has been a rise in the number of borrowers. 

But, lenders who continue to provide payday credit must comply with the FCA regulations to operate. In addition, such lenders should work towards improving the market reputation of HCST credit providers. 

Tips for borrowing small cash loans – bad credit

Here are some tips that’ll come in handy when you apply for a small cash loan:

  • Have a clear idea of the loan amount and your repayment capability.
  • Check your credit score for discrepancies and dispute them to boost your score.
  • Maintain a credit utilisation ratio of 30% or less. 
  • Enrol yourself into the electoral register – this could fetch you up to 50 points. 
  • Space out your applications to avoid multiple credit enquiries in a short span. 
  • Make a repayment plan before applying for loans.
  • Set up a direct debit to ensure timely payments each month. 
  • Don’t use the money from your loan on frivolous spending.
  • Try to keep a short loan term to save on interest. 

Self-assessing your credit report before applying for credit will buy you time to work on improving your score. Besides, regular assessments of your credit report will give you a chance to dispute any erroneous records or unidentified enquiries recorded on your credit profile, giving your score a much-needed boost.

Pros and Cons of personal loans with no credit check 


  • No credit check lenders lend money despite low credit scores.
  • No credit check loans have faster payouts. 
  • No credit check loans can help you cover emergency expenses, even if you need just a tiny amount.
  • You can solve any purpose with a no credit check loan without constraints on usage.  


  • No credit check lenders set high interest rates on loans due to greater perceived risk.
  • Loans with unreasonably high interest rates can push you further into debt, especially in the case of a low-income household. 
  • No credit check loans are packed with hefty penalties – missed payment charge, early repayment charge, etc. 


While no credit check loans may seem like a practical solution, consider the soaring interest rates and repayment implications before choosing this option. 

No credit check lenders run a hard credit check on your credit score. But, you may not be able to enjoy low-interest rates with a bad credit rating. So, it would be helpful to spare some time before applying for loans and use it to work on your credit score. 

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