How to Get a Loan without a Bank Account?
Managing personal finances with a bank account is easier as it allows seeing the ongoing transactions through statements. But, unfortunately, a 2017 study revealed that more than two million Britain adults manage finances without a bank account.
It may safeguard such people against modern online banking and finance frauds; however, comes with implication. For example, Financial Inclusion Research stated that such individuals face a loss of £1,300 yearly compared to people with a current account.
Moreover, the research even concluded that sixty per cent of the people closed their bank accounts due to debt or bank related issues. As a result, such individuals had to make direct debit payments and even benefitted from the discounts.
The proportions of households with a low income and no bank account were ten per cent in 2017. It was twenty-five per cent in the 1990s. However, families with low incomes and no bank accounts have significantly diminished due to the introduction of the post office and basic bank accounts.
5 Steps to Get a Loan without a Bank Account
● Find Different Available Options
You can avail different forms of loans even without a bank account. These include title, pawn, debit card, bitcoin, payday, PCCU, etc. However, each of these loan options comes at a much higher rate than people with a bank account.
Therefore, finding the most suitable loan options and applying through an online or offline application is necessary. In addition, your driver license and ownership documents of a car or motorcycle can help to approve a few of these loans.
For example, lenders that offer title or pawn loans require such documents with the borrower’s name in the lien-free title. Thus, title loan lenders are suitable for people who can’t fulfil personal loan requirements.
● Measure the Pros and Cons of Eligible Loans
After carefully enlisting the available options based on the credit score and eligibility criteria, it is necessary to compare them. A title loan is a short-term option that allows taking a maximum of fifty per cent of the car’s value. It comes with a 200% interest rate.
You can avail of this loan by getting your vehicle appraised. After that, the money is delivered via money order or check. Similarly, pawn loans allow borrowers to put valuables as collaterals in a pawn shop.
Pawn loans allow borrowers to borrow twenty-five to sixty per cent of the resale value and make regular repayments in cash. The borrower would receive the valuable after completing the repayments.
The APR of pawn loans is much lower than title or payday loan. You can avail of this loan by getting a product appraised online or at a pawn store. You would receive a ticket for reclaiming the item after completing the repayments.
Likewise, bitcoin term loans can prove useful for borrowers without a bank account. However, you should have a verifiable id to avail of this loan. Also, lenders offer different maximum amount at variable APRs.
The process requires setting up a bitcoin account and making a post for requesting funds. You can even choose from alternative options like payday and doorstep loans.
● Compare Loans Against Other Options
Before applying for high-interest loans because of a lack of a bank account, it is crucial to measure benefits against alternative options. For example, prepaid credit cards help to manage everyday expenses after loading the funds on a card.
The cardholder still doesn’t hold a bank account with a prepaid credit card but can manage regular transactions online and offline. Moreover, unlike bank debit cards, these don’t require a minimum balance.
Additionally, prepaid cards eliminate the requirement of undergoing checks because the user loads the funds onto them. Likewise, you can cash checks at the nearest bank branch of the writer if you don’t have a bank account.
Even a small community bank or a local credit union can prove useful for borrowing money. But they may require some paperwork and following certain criteria to avail loans. You can even manage utility expenses with a pre-payment meter.
Unfortunately, you can’t take a mobile phone on contract without a bank account. But, you can take prepaid mobile phones with a sim. But, it would require topping up the balance regularly from a shop, online, or post office.
The option of personal loan is not available for borrowers that have declared bankruptcy, CCJ, IVA in the past six years. Also, it would help if you had a regular monthly income of more than £6,000 and can make payments through direct debits.
● Apply and Wait for Approval
According to research, most borrowers don’t apply for payday loans after weighing the options. As per the source, only six per cent of people without a bank account apply for it regularly. Also, one per cent of these individuals claimed to apply for it every month.
You can apply for a loan online or offline. However, the lender options significantly diminish the latter compared to the former. Moreover, online lender responses are much faster compared to offline.
Make sure to resolve bank issues or repay previous debts before applying for approval. By doing so, you would improve the credit score. Additionally, lenders become more prone to borrowers that can show evidence of payments.
Loan approval varies upon factors like financial history, the reason for the closure of the bank account, last repayment, status of previous loans, and collateral. Therefore, lenders require to measure these factors before providing the money.
Moreover, title and pawn loans would also require verifying the car’s credibility, motorcycle, or other valuations. Therefore, confirming the same could take some time. It would also require ascertaining ongoing loans on the offered collaterals or assets.
● Start Making Regular Repayments
Unlike individuals with bank accounts, lenders collect repayments through cash or check. Therefore, taking a new loan improves the borrower’s credit rating and opens doors to a new bank account.
As a borrower, you can continue to make repayments through doorstep payments, cash, or check, or direct debits from a bank account. Moreover, a current account offers many advantages.
Borrowers with a bank account can transfer their existing debt to a zero-interest credit card and make interest-free repayments. Moreover, it eases accessing cash, availing interest on a savings account, securing finances, and building a credit history.
Meanwhile, not having a bank account leads to storing cash at home, expedites spending records, using bill split apps, cashing checks, etc. Moreover, you would not become eligible for a mortgage and many other loan options without a bank account as lenders require financial proof.
But there are two other major disadvantages for people without a bank account. They require having manual proofs of repayments to the lender and suffering through skyrocketing interest rates. It makes recover the existing debt challenging and lands the borrower into an ongoing debt cycle.
Besides this, applications for a student loan without a bank account would get rejected instantaneously. So, the student would require managing university or college finance without financial help from the government.