Are Loans Without Credit Checks Safe?

Borrowing money isn’t always easy. You may find it incredibly challenging to secure funds when you have a bad credit score. But some lenders cater to people with a low credit score; you just need to find the right one. 

Many people resort to high-cost short-term alternatives such as payday loans or no credit check loans to get a quick cash advance. While these options may give you access to funds quickly, the catch is that they’re entwined with interest implications. So how do you know which option is safe? 

In this article, we’ll learn more about no credit check loans and if they are a safe alternative to traditional loans. 

What is a no credit check loan?

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

  • They’re afraid that formal credit checks will further damage their credit score. 
  • They’re afraid that the lender may deny their loan based on their credit score. 

It is essential to understand that all FCA authorised lenders must carry out a formal credit check before lending money to a borrower. This credit check is a gauge of the borrower’s repayment capability. 

So, once you accept a preapproved loan offer, an FCA authorised lender will perform a hard enquiry on your credit profile. Most lenders form their lending decision based on this hard enquiry. 

This is where no credit checks lenders come in. Lenders who advertise no credit check loans only imply that there won’t be a credit check. However, they do carry out a formal credit check. The only difference between traditional lenders and no credit check lenders is that these lenders are willing to look beyond just your credit score. 

Unlike traditional lenders, no credit check lenders don’t let your credit score drive their lending decision. This is one of the key reasons people with a low credit score find this financial product appealing. However, it is crucial to understand that no credit loans pose a greater risk to a lender than a borrower. Since there’s no gauge on the borrower’s repayment ability and a higher risk proposition, lenders set high-interest rates on no credit loans. So, weigh the pros and cons before opting for no credit check loans. 

FCA authorised loan brokers like Oyster Loans can help you compare loan offers from multiple lenders. Oyster Loans has a panel of FCA approved lenders that offer various options for people struggling with a low credit score.

Should I borrow payday loans with no credit check?

Payday loans are a form of high-cost short-term credit that you can borrow to tide over a short-term financial crunch. These cash advances have a quick disbursal time and can be paid off over a week to a month. 

The concerning bit is the sky-high interest rates that lenders impose on payday loans. The average APRs for payday loans sometimes exceed 300%. However, since these loans had quick payouts and wider accessibility, people continued to opt for them despite the unreasonable interest rates. Seeing this, the FCA put a price cap on payday loans to safeguard the interest of the consumers. 

For every £100, the lender cannot charge you more than £24 over a 30-day loan term. If you miss a payment or don’t pay an instalment on time, the maximum penalty that a lender can impose is £15, plus the interest on the amount borrowed. The price cap also ensures that you do not pay more than twice what you borrowed to your payday lender.

After the FCA intervened and implemented stricter regulations and price caps on payday loans, the number of payday lenders in the UK lending market plummeted. Lenders who want to continue to lend payday loans are now obligated to comply with the FCA regulations to improve the market reputation of HCSTC (High-Cost Short-Term Credit) providers. 

Tech giants like Google and Facebook have also restricted their advertisement criteria. Lenders often use these platforms for advertising financial products. But ever since the FCA started regulating payday loans, these companies come up with a stringent set of rules to restrict explicit financial advertisements on their platforms. The FCA’s initiative is a pivotal step in ensuring unbiased credit opportunities and uprooting consumer exploitation from the industry.

Are loans without credit checks safe?

If a lender offers to give you a loan without conducting a formal credit check or a hard enquiry, you should thoroughly contemplate what you’re committing to. As per the FCA’s norms, an FCA authorised lender cannot provide funding to borrowing without conducting a hard credit check to assess their repayment capability.

 If a lender gives you money without conducting a credit check, it wouldn’t be possible without breaching the FCA’s contract. Alternatively, you may be dealing with a lender who is operating illegally. It is easier for unauthorised lenders to exploit borrowers into a debt trap. 

On the other hand, no credit check lenders are lenders who cater to people with a low credit score. These lenders perform a hard formal enquiry on applicants. However, they lend money based on the lender’s overall financial circumstances and not just the credit score. Although, no credit check lender set high interest rates on loans due to a higher risk proposition. 

What do lenders look for in a credit report?

When conducting a credit check, lenders usually look for the following:

  • All your past loan obligations, credit cards, outstanding mortgages.
  • Outstanding bank overdrafts for your current bank account.
  • Your repayment history – particularly missed payments. 
  • County Court Judgments (CCJs) issued in your name – they stay on your credit report for 6 years. 
  • Any bankruptcy declarations from the past. 

Self-assessing your credit report before applying for credit may buy you time to work on improving your credit score. Besides, checking your credit report will give you a chance to dispute any erroneous records or unidentified enquiries on your credit profile, boosting your credit score. 

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No credit check loans may seem like a practical solution, but it is vital to consider the unreasonable interest rate before choosing this option. However, even no credit check lenders run a hard credit check on your credit score. You may not be able to enjoy low-interest rates with a low credit rating. So, please spare some time before applying for loans and use it to work on your credit score. 


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  1. author
    27 Aug 2019
    Tomas Mandy

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    1. author
      27 Aug 2019
      Britney Millner

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  2. author
    27 Aug 2019
    Simon Downey

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