What are credit loans?
In the consumer lending arena, a credit loan describes a type of financing that is based primarily on the borrower’s credit and does not require the borrower to pledge any valuable asset as collateral. It is not uncommon for credit loans to be called signature or personal loans.
Unlike obtaining a loan through more traditional means, such as a commercial bank or credit union, credit loan lenders will often make loans to those who have less-than-perfect credit. This can open up an avenue to funds for those who may have no other options available.
Credit loans are often structured as installment loans, with regularly scheduled “installment” payments that are amortized to pay off the credit loan’s principal balance and all interest charges that may been incurred, by the end of the loan.
Can I Get a Credit Loan with Bad Credit Scores?
Although a credit loan is based primarily on the applicant’s credit history, many credit loans do not require perfect credit records or high credit scores. In fact, some credit loan providers consider alternative credit reports or look beyond the person’s credit score. This means that consumers with damaged or less-than-perfect credit, or no credit at all, may still qualify for a credit loan.
The specific credit requirements and restrictions for credit loans will vary depending on the lender. For example, some lenders rely on FICO credit scores, while other credit loan companies do not use this popular credit scoring system. And among those credit loan providers who do use credit scores, the minimum credit score requirements may also vary.
What do I Need to Qualify for a Credit Loan?
Although credit loan providers do have varying requirements, based on their underwriting guidelines, many credit lenders have the following qualification requirements:
- Income verification. Credit loan providers will require income documentation to confirm that the borrower has sufficient income to afford and repay the loan. Typical income verification requirements include recent paycheck stubs or bank statements. They may also contact the applicant’s employer to confirm current employment.
- Identification. Credit loan companies take several steps to confirm the identity of all prospective borrowers. This may include copies of driver’s licenses, social security cards or state IDs, as well as verification questionnaires.
- Checking accounts. Many credit loan lenders require that the borrower have an active checking account. In addition to directly depositing loan funds into the borrower’s accounts, an active checking account may also be necessary to schedule timely installment loan payments.
- Credit history. Credit loans usually rely on the applicant’s credit record to determine eligibility for the loan. But as noted earlier, many lenders do not require perfect credit records or very high credit scores in order to qualify for a loan.
Applying for a Credit Loan
Potential borrowers can often apply for a credit loan through the internet. In fact, many lenders today increasingly rely on online applications to speed up their originations. Direct lenders with fully functioning websites are often able to provide eligible credit loan applicants with a decision and loan offer in a matter of minutes – while allowing consumers to apply for a loan from the comfort and privacy of their own homes.
Disclaimer: NetCredit does not provide financial advice, nor does it vouch for any vendor or service mentioned on our NetCredit consumer lending blog or internet loan dictionary. Always research and perform due diligence on any service provider or vendor before deciding to use them, and we recommend that you speak with a financial advisor regarding all decisions that will affect your finances.