For those with bad credit or lackluster credit history, getting a personal loan without a credit check seems like a financial dream come true. Unfortunately, if you stumble across an offer for a no-credit-check loan that sounds too good to be true, it probably is.

Let’s take a closer look at how these personal loans work, why these lenders don’t require credit checks to borrow money, and the reasons financial experts say you should only use these bad credit loans as a last resort.

What is a no-credit-check loan?

With a no-credit-check loan, the lender doesn’t check your credit history or review your credit scores from any of the major credit bureaus before issuing you loan funds. Sometimes called a bad credit loan, this lending approach is common with payday lenders and other online lenders and has extremely high annual percentage rates (up to 400% APR) and short repayment terms.

It’s important to define what qualifies as a no-credit-check loan. Even predatory loan lenders may do a soft credit inquiry, sometimes called a soft credit pull, which can be done without your knowledge or permission. The Consumer Financial Protection Bureau assures these soft inquiries are just "reviews of your credit file, including reviews of existing accounts by lenders, prescreening inquiries by prospective lenders, and your requests for your annual credit report" that won’t affect your credit score.

A hard credit check requires your consent and is usually done by financial institutions processing an application for a traditional personal loan, a credit card or an auto or home loan. A hard credit inquiry shows up on your credit reports and too many hard credit checks in a short time period can mean a lower credit score.

If avoiding a hard credit check sounds like a plus, remember this: By not checking your credit thoroughly, a lender is taking on more risk in lending you money. They cover themselves by saddling you with extremely high interest rates. The best loans often do involve a hard credit inquiry because they come with more favorable terms.

Read more: What credit score do you need for a personal loan?

3 types of loans that don’t require a credit check

Loans that don’t require a credit check, sometimes called no-credit loans, usually fall into the following categories.

Payday loans

Payday lenders or cash advance apps issue no-credit-check loans for just a few hundred to a few thousand dollars that work as an advance against your next pay period.

Commonly used for emergencies or temporary income gaps, a short-term, high-interest payday loan can trap bad credit borrowers in a cycle of debt and worsen already poor credit scores.

No-credit-check installment loans

You might stumble across an online lender offering unsecured loans without a credit check. These no-credit-check installment loans provide a lump sum of money that’s larger than payday loans, but usually at very unfavorable loan terms including triple-digit interest rates.

Car title loans

Title loans are secured loans that use the title of a car that you own outright as collateral. The loan amount for these secured personal loans will depend on the actual cash value (ACV) of your car. At the first sign of missed payments on these high-interest loans, the lender can repossess your vehicle.

Read more: Payday loan vs. personal loan

What to know before you apply for a no-credit-check loan

Before you sign up for more than you bargained for, review these considerations for no-credit-check loans.

1. There could still be a soft credit check.

If not giving lenders access to your credit profile is a major concern, be aware that even no-credit-check loans often do a soft inquiry as part of the application process. They may even check with all three major credit bureaus to see if you have a bad or no credit score.

2. There might be other criteria.

Just because the lender doesn’t ask for your credit score doesn’t mean they won’t have other requirements. It’s typical even for payday lenders to ask for your debit or bank information, several forms of identification, your Social Security number and proof of income or employment status.

3. The repayment terms will be unfavorable.

In exchange for the risk they’re taking on a borrower with a low credit score, lenders look to recoup their losses with exorbitant fees, sky-high high-interest rates, and short-term loans that can be rolled over and renewed to maximize their profits.

4. It might be a scam.

Reputable lenders check your credit because they need to know you can make your monthly payments. Lenders that aren’t interested in making sure you have at least a fair credit score or a positive payment history might be running a scam to obtain your personal and financial information or to pocket an application fee.

5. You probably have better loan options.

You might think you need a higher credit score to qualify for an affordable loan or debt consolidation, but it’s worth getting quotes from multiple lenders to see if you have other options. In general, the minimum credit score required to qualify for a personal loan is 580, though that varies by lender. With a higher score, you’ll qualify for better terms.

Read more: The best personal loans

4 alternatives to no-credit-check loans

If you’re considering a no-credit-check loan, make sure you’ve exhausted all other options before you turn to what could be a predatory lender for help.

Co-signed or joint personal loans

If you can’t qualify for a personal loan on your own, consider asking a friend or family member you trust to co-sign on a loan. Just be aware that joint personal loans mean both parties who sign are equally responsible for loan payments.

Read more: What to know about adding a co-signer on a personal loan

Secured personal loans

Qualifying for an unsecured personal loan can be tricky when you have bad credit, but some banks and credit unions will consider a secured loan. For a secured loan, you’ll have to put up collateral like a car or bank account as part of the loan agreement. If you fail to make a loan payment, the lender can then seize your assets.

Payday alternative loans (PALs)

Under the National Credit Union Administration (NCUA), federal credit unions offer small-dollar loans called PALs, which are more consumer-friendly alternatives to payday loans. Loan amounts with these credit union lenders are between $200-$1,000 and repayment terms range anywhere from one to six months.

Credit card or cash advance

Certainly using a credit card as your personal savings account during an emergency is not ideal. But if the only alternative is a no-credit-check loan with triple-digit interest rates, it’s better to charge the card than risk having to rollover your short-term loan when you can’t make the monthly payment. Just be sure to work out a payment schedule for yourself that gets you out of that debt as quickly as possible.

No-credit-check loans FAQs

Can I get a loan with no credit history (or a bad credit score)?

It’s possible to secure a personal loan with bad credit (or no credit at all), but it usually comes with a steep price tag. Bad credit borrowers usually pay high interest rates and origination fees. And if you fail to make on-time payments, you’ll worsen an already problematic credit score and further damage your creditworthiness.

What's the minimum credit score to get a personal loan?

According to Experian, one of the three major credit bureaus, lenders prefer borrowers with credit scores of 670 or above. Other creditors require at least 680. You may qualify for a personal loan with a lower score, but you’ll pay a much higher interest rate.

What's a credit builder loan?

If you have a bad credit score or are “credit invisible,” a credit-builder loan can help. Instead of getting the loan amount upfront, credit-builder loans provide access to the loan funds in a savings account after you’ve completed your monthly payments. Meanwhile they report your on-time payments to the credit bureaus, bolstering your score and improving your loan eligibility.

Read more: What’s a credit-builder loan?