You can probably get a $500 loan with no credit check by getting a secured loan where you have to hand over the collateral property or title to your lender until you pay back the loan. Examples include pawn shop loans and auto title loans. With other loans, “no credit check” claims usually mean no hard credit pull on your credit history. These loans will still have soft credit checks, which won’t affect your credit score. A payday loan is an example. But if you have a bad credit rating, don’t assume that means you can’t get a loan with a credit check. Several financing options may still be within your reach despite your poor credit history.
A recent survey found that only 44% of Americans would be able to cover an unexpected $1,000 expense with savings. Far from being a temporary issue created by preceding years’ pandemic, this 44% is an improvement, the highest value the surveying organization has obtained in eight years. Whether your difficulty scraping together enough money for an emergency owes to a run of very bad luck or a need for remedial training in personal finance, you are not alone. Most Americans are right there with you.
Naturally enough, people who don’t have the money to cover an unexpected expense often don’t have good credit. Once financial difficulties start, they tend to compound, one problem building on another. Just as you think you see some light at the end of the tunnel, rent comes due, or you get a larger-than-expected bill for utilities, or your car breaks down, or you have to visit an emergency room, or — you get the picture.
Is a “$500 loan, no credit check” the solution, or just hype?
Your situation seems hopeless. But then you read that such-and-such a company offers just the sort of small loan you need with no credit check required. Is a $500 loan with no credit check a real thing? Or are offers like these just how today’s fraudsters gull their next sucker? Keep reading to find out if you really can get a $500 loan with no credit check and what you need to do to get a $500 loan with or without the check.
More often than not, “no credit check” is hype
“No credit check” and “guaranteed approval” claims are mostly hype. Unless you get your loan from a private “direct lender” working out of an urban alley or adult entertainment establishment, most loans, even for a small amount like $500, will mean a credit check. Even lenders who specialize in lending to people with bad credit like to know just how bad that credit is.
Secured loans where you actually hand over your property (or its title) to the lender until you pay back the loan plus interest are an exception. The only risk these lenders run is the risk of receiving stolen property, and a credit check wouldn’t help them with this. Trust-based loans from friends and family may also be had without credit checks, of course.
Though genuine “no credit check” loans aren’t plentiful and are often a very bad idea anyway, this doesn’t mean you should lose hope. It is possible to minimize so-called hard credit inquiries. The alternative, soft credit checks, won’t hurt your credit. And the fact that you have a bad credit score doesn’t mean you won’t qualify for a loan. It just means any loan you get will cost you more and come with requirements borrowers with better credit don’t have to deal with.
“You mentioned direct lenders. What are they, exactly?”
Good question. The preceding reference to private direct lenders of suspect legal status was, of course, tongue-in-cheek. But if you read marketing copy for, say, payday loans online, you will find the phrases “direct lender” and “direct lenders” repeated incessantly. Why? Direct lenders originate, underwrite, and fund the loans they make. When a single entity handles receiving your loan application, assessing whether you are an acceptable risk, making a loan offer, and handing you the money, you might reasonably expect the loan process to be more flexible.
Most importantly, it might allow some wiggle room in the eligibility criteria — you hope. Yes, you have a poor credit score, but you’ve worked for the same company for 12 years, and your income has risen steadily (albeit slowly) all that time. Medical bills have created a financial emergency for you and torpedoed your credit. But you can still be counted on to pay back this small, short-term loan of emergency cash. Can’t the lender take all these factors into account instead of just rejecting your loan request based on what the credit bureaus say? A direct lender, in theory, can be more flexible.
Though a provider of short-term loans like payday loans will often be a direct lender, a direct lender with sufficient funds might offer any sort of loan. For something like mortgages, a direct lender needs to have very deep pockets, so direct mortgage lenders include weighty financial institutions like banks and credit unions, as well as big non-bank lenders like Quicken Loans. Smaller loans, such as the $500 loan you’re seeking, allow smaller — and more numerous — direct lenders.
Getting your $500 loan: a survey of options
Your basic options for a $500 loan include unsecured and secured personal loans. Unsecured personal loans include trust-based loans from friends and family, traditional lump-sum loans you pay back in installments, personal lines of credit, credit cards, and payday loans. Secured personal loans include auto title loans, auto equity loans, pawn shop loans, and loans against anything else you own, or in which you have equity (owe less than what they’re worth). In the following sections, we’ll describe these options and, when possible, refer you to comprehensive SuperMoney articles on each, starting with the loans that don’t require collateral.
A loan request to friends or family
Unless you have previously alienated friends and family by behaving badly and borrowing money without repaying it, this could be among the best quick ways to borrow money. A friend who knows you can be trusted probably won’t require collateral and is very unlikely to run a credit check. And family members may only turn you down if your repeated failures to live up to promises have forced them to implement a “tough love” strategy.
If you have family or friends who are better off financially, you should explore this possibility before floating a loan that will cost you interest and, if things don’t go well, hurt your already sketchy credit history.
Traditional personal installment loans
Unless you’re just curious how people on the wrong side of the tracks live, you’re researching how to get a loan with no credit check because you think your credit score is bad, or at least not good. Are you right? If you are, does that mean your only hope is a lender who doesn’t conduct credit checks?
Credit scores range from 300–850. Scores from 300–579 rate as “very bad,” scores from 580–669 as “fair.” A fair rating, however, doesn’t mean your rating is OK. The way lenders look at it, if your score falls below the average range of 620–720, you have a bad credit score. If they offer you a loan, the rate and terms will reflect this judgment.
That said, there certainly are lenders who will give you a fair hearing in spite of your bad credit, provided it’s not lower than, say, 500. If you can show you have a stable employment history and reliable income, you could get the loan you need. These personal loans have fixed rates, which will make the monthly payment predictable, and lenders tailoring to lower credit scores may make loans as low as $500, though $1,000 and $2,000 minimums are more common. Be wary of lenders offering borrowers with bad credit scores loans with guaranteed approval, however, since consumer protection regulations require lenders to assess borrowers’ ability to repay before loan approval.
Personal lines of credit
When many of us hear “line of credit,” we envision a well-heeled gentleman or lady granted virtually unlimited access to credit by the ingratiating staff at a large bank. While it may be true that wealthy people get a lot of perks others don’t, you don’t have to be rich or have stellar credit to get one.
It’s true that most lines of credit require good to excellent credit. Credit unions and alternative lenders, however, may grant lines of credit to borrowers with lower scores. These can range from $100 to thousands, depending on your income and credit history.
Personal credit cards
A secured credit card obviously won’t help if you need to cover a $500 expense now and pay for it later. Fortunately, some credit cards for people with bad credit are unsecured cards. You’ll want to inspect these card offers closely because many have high fees and high APRs (annual percentage rates). If you need your $500 in cash, be sure to find out what the fee is for cash advances and what the APR is for cash advance balances. The interest rate for cash advances will typically be higher than the rate for purchases.
Payday loans are not a long-term financial solution. If you can avoid taking out a payday loan, you should. But desperate circumstances do sometimes make this a justifiable option. Bank overdraft fees can cost you more than the payday loan that prevents an overdraft, for instance. And keeping the car you need for work running so you can maintain an income is less costly than losing your income entirely because you can’t afford repairs.
Payday lenders: a necessary evil?
So, despite being widely vilified as predatory lenders, payday loans aren’t invariably evil. The reality is that the marketplace only produces industries for which there is a demand. If no one felt a need for these loans, the industry would not exist. Even if you don’t care to identify high-interest lenders like Speedy Cash and Credit Ninja as heroes à la Walter Block, you should probably grant that they do serve a useful purpose for some low-credit borrowers, possibly even yourself.
Useful though this industry might be for some, you should approach it with caution. Some payday lenders might encourage you to choose repayment options that will cost you more. But, then, you should exercise similar caution when you borrow money from anyone. Before getting a payday loan, carefully compare offers from several lenders, including payday loans online, and see what past customers have to say about each of them.
Cost of a typical payday loan
A typical payday loan will have you write the lender a postdated check cashable in two weeks’ time. The lender will then issue you a loan of that amount minus fees. Fees of $15 per $100 borrowed are common. That’s equivalent to an APR of 390%. And this equivalence could approach reality if you put off paying back your loan until after the initial due date. Depending on state laws, you may be able to do a balance rollover or set up a payment plan. Either option will involve added fees that increase your already high costs. So will late repayment fees if you show up to pay back your loan without making either arrangement.
If a payment plan is available, it will probably cost you less than a rollover. Each rollover will likely cost you as much as the original loan. In effect, you pay off your original payday loan with a new one for the same amount, paying the same $15 per $100 for the privilege and receiving no new cash. If you do this for a year, you will pay $390 in fees for every $100 you borrow. And additional fees are not impossible.
Don’t let a payday loan turn into a trap
Put another way, if you are in such dire straits that you might not be able to pay back a payday loan when due, getting such a loan could mean falling into a debt trap you won’t easily escape. In 2014, the Consumer Financial Protection Bureau (CFPB) found that payday loan borrowers opt for rollovers or get new payday loans within two weeks of the first 80% of the time. This suggests that many payday loan borrowers do fall into a debt trap. Rather than fall into one yourself, make sure before you get a payday loan that your financial situation doesn’t make bankruptcy a better option. If you’re not sure what you should do, consider speaking with a credit counselor.
So much for unsecured loans. What are your secured-loan options? Let’s examine those now.
Auto title and auto equity loans
If you have a car worth more than what you owe on it, this family of options will typically offer better rates than payday loans, but poorer rates than most personal loans and credit cards. Depending on whether you have paid off your car loan and hold free-and-clear title or still owe money, you have different options. All of these loans put your car at risk of repossession if you fail to pay them back. These loans won’t usually require a credit check, since being able to repossess and sell your car greatly reduces lenders’ risk, and the high rates and fees compensate for the cost and hassle of the occasional repossession.
Auto title and auto pawn loans
If you hold title, your options include auto title loans and auto pawn loans. Auto title loans let you keep possession of your vehicle during the loan. You do hand over your title, however. Some online auto title lenders may even give you one of these without inspecting the car in person. Terms can run from a few weeks to more than a year. To learn the benefits and drawbacks of auto title loans, read Pros and Cons of Auto Title Loans.
Auto pawn loans often require you to surrender your vehicle to the lender until you pay off your loan. If the reason you need a $500 loan is to keep your car running so you can get to work, auto pawning may not be a good option for you. That said, some lenders will offer “auto pawn” loans that only require you to surrender the title. These are short-term loans you need to pay off in a few weeks to a few months. To learn more about these loans, read Auto Pawn Loans: The Ultimate Guide to Car Pawn Shops.
Auto equity loans
If you still owe money on your car, meaning your lender still holds the title, you won’t be able to get an auto title or auto pawn loan. But if you’ve paid down your balance, so you owe less than your car is worth, you may be able to borrow against the resulting equity. If you are part of a credit union, you should check on this possibility with them first since credit unions cap the rate on these loans, putting them in the expense range of common credit cards. Before deciding before or against this option, read How to Get an Auto Title Loan Without a Clear Title for a comprehensive overview.
Pawn shop loans
If you have property of value other than your car and cannot qualify for a personal loan, a pawn shop loan could be a good option. While these loans are not cheap, they may beat out payday loans and such other bad-credit loans as car title loans. A 30-day loan could cost you 20%, on par with a payday loan, but you would not risk a ding to your credit or having to roll over the debt.
To get a pawn shop loan, you just take your identification and the property you want to pawn to a pawn shop and negotiate a loan amount. Once you and the shop agree on an amount, you hand over the item (or items) in exchange for a pawn ticket. The shop agrees not to sell your property during the loan term, typically around 30 days. If you don’t pay back the loan before the term ends, the lender will put the item(s) up for sale.
Interest rates and loan offers vary widely among pawn shops, so you should check more than one if you have multiple of them in your area.
To learn more about this option, read Are Pawn Shop Loans Ever a Good Idea?.
Other secured loans
The preceding are the loans that borrowers with bad credit most often turn to. There are additional secured loans some borrowers may find useful, though. Examples include loans against savings accounts, certificate of deposits (CDs), 401(k)s, recreational vehicles (RVs), and boats.
If you own a home, even a home equity loan or home equity line of credit (HELOC) might be a viable option for you. Though both will require a credit check, bad-credit options for both home equity loans and HELOCs do exist. Read SuperMoney’s Ultimate Guide to Secured Personal Loans to learn more about the range of secured loans and how to get them.
- If you need a $500 loan but have poor credit, you have several options
- Your unsecured loan options include:
- Loan from a friend or family member
- Personal loan from a bank, credit union, or other lender
- Line of credit
- Credit card
- Payday loan
- Your main secured loan options include:
- Auto title loan
- Car pawn loan
- Auto equity loan
- Pawn shop loan
- For certain borrowers, other secured loans may also be viable options, such as home equity lines of credit (HELOCs) and loans against a borrower’s 401(k)
View Article Sources
- 56% of Americans can’t cover a $1,000 emergency expense with savings — CNBC
- CFPB Data Point: Payday Lending — CFPB
- Defending the Undefendable by Walter Block — Mises Institute
- Many payday lenders steer borrowers to higher-cost repayment options…. — CNBC
- Useful articles from Credit Ninja and GreenDayOnline, from other payday loan and personal loan providers, and from credit monitors’ sites — Various
- What are the costs and fees for a payday loan? — CFPB
In addition to these external sources, readers may find multiple links to helpful SuperMoney pages in the article above.