If you’re struggling under the weight of poor credit, the idea of easy loans for people with no credit must sound like a miracle. After all, no one likes to spend hours shopping for different lenders to find a loan they want, only to be told no because of their credit. It’s more than disheartening – it’s downright infuriating.
That’s exactly what lenders who offer “easy” loans are counting on. They promise to make getting a loan the simplest, most enjoyable experience you’ve ever had. What they deliver is a situation that can completely ruin your life.
Don’t be misled by the empty promises of these lenders. Following are six common but dangerous myths about easy loans marketed to people with no credit.
1. Your Credit Score Doesn’t Matter
I won’t deny that these lenders will give you a loan without checking your credit. That part is true. But saying your credit doesn’t matter with these loans is like saying your roof doesn’t matter because it never rains. On the surface, it seems reasonable, but a closer look will tell you differently.
Easy loans have outrageous interest rates and APRs, up to 300%, not to mention short repayment windows. They’re designed so that you will, most likely, fail to make your payments and continue to stay in debt. Once that happens, your credit score will begin to plummet.
2. It’s Too Difficult to Build Credit
Easy loan dealers want you to believe that it is too difficult to build your credit. This is because they want you to rely on them when you can’t get approval through normal loans.
The reality is that building credit isn’t terribly hard. It is, however, tedious and time-consuming. There’s no way to instantly build credit, and it does require careful monitoring. Common ways you can build credit include:
- Paying your bills on time
- Reducing debt
- Opening a new credit card
- Getting approved for a loan
- Raising your credit limit while reducing credit utilization
None of these are particularly difficult, but they obviously require a conscious effort on your part. More importantly, it can take months or even years to achieve a good score. That’s still far better than turning to a predatory lender who will ultimately drag your score down even further.
3. Other Loans are Too Complicated
Predatory lenders would have you believe that “normal” loans are complicated and beyond your ability to understand. This is a lie. There are plenty of quality lenders who make the process simple but also take the time to explain every single aspect of your loan.
Here at Loans Now, for example, we ask for your name, city, the amount you want, and your credit score (which you provide – we don’t check ourselves). We then give you some great lending options. That’s it. There’s no shopping, emailing back and forth with dozens of lenders, or having to pull a bunch of numbers together yourself.
Don’t buy into the myth that these higher interest, quick repayment loans are the easiest personal loan to get.
4. Other Loans Take Too Long to Receive
This isn’t the case at all. This is a common claim used to snare people who need money quickly, say, to pay for a surprise dental bill. With a bad credit personal loan, different from an “easy loan,” you still have the potential to get your money in as little as 24 hours.
This depends more on how prepared you are when you apply for your loan. Having the required documentation, the speed that you review your loan paperwork, and how much time you spend talking to the lender are the biggest determining factors.
Some loans do take longer to process. Mortgages, for example, usually take the longest. Realtor.com reports that the average time to receive a mortgage is anywhere from 45 to 60 days. By contrast, Forbes reports that the average turn around for a personal loan is two weeks.
5. You Can’t Get a Normal Loan Without a Credit Score
While it’s true that the majority of lenders won’t work with people without credit, this isn’t a universal rule. In recent years, many lenders have started to accept alternate data points to prove that a person can handle a loan repayment.
According to the Lending Times, a number of organizations, including FICO, are introducing new measures to calculate a person’s risk besides a traditional credit score. As this trend continues to grow, more and more people who were previously denied will start having access to better lending options.
Fico Score XD
FICO’s new FICO Score XD uses payment histories of things like phone and utility bills to assign a score. They generated a score for over 26.5 million people who were previously unscored.
Developed by TransUnion, this alternative credit scoring model incorporates a wider range of data to generate a score. Rather than separating data into individual bulks of information (such as per year), CreditVision Link looks for trends in a person’s current situation and compares it to trends from the past two years. It’s helped over 60 million people achieve a credit score.
6. You Have to Have a High Paying Job to Get a Normal Loan
While it’s true that lenders are more eager to work with people with better incomes, you don’t have to have a high paying job, or even a job at all, to get a loan. In fact, many lenders cater their business to low-income families who have a difficult time securing loans through normal channels.
The reason that having a regular source of income is such a big deal to lenders is that they want to be sure they’ll get their money back. Stable employment is the most common source of steady revenue.
Capacity is More Important Than Income
Capacity, or your ability to repay a loan, is what matters most to lenders. For example, if you had thousands of dollars invested in stocks, you could potentially use that to demonstrate a high capacity. Capacity is not always measured in employment.
Another reason you don’t necessarily need a high paying job is that you may not need a big loan. If all you need are a few hundred dollars to help fund your Christmas shopping, there’s plenty of lenders willing to work with you.
7. Lenders all Demand Collateral
Collateral is an asset you promise to turn over to a lender if you default your loan. Contrary to popular belief, not all loans, not even those available to people with poor credit, require collateral.
While offering collateral can often help increase your ability to receive a loan, the risks are apparent. Many personal lenders choose to accept the risk and make up the difference by charging a higher interest rate. While this isn’t ideal, it’s better than losing your car or house if you default.
But you also don’t need to pay the outrageous rates that “easy” lenders charge just to get a loan without collateral.