Can You Get a Loan Without a Bank Account?

Yes, there are some loans that won’t require the borrower to have a bank account. Typically, these types of loans are ones that are designed for borrowers with low credit scores. But whether or not the lender requires a bank account will depend on their specific eligibility requirements. Common lenders that may be willing to work with you even without a bank account include payday lenders, title lenders, pawnshop lenders, or cash advance services.

Why Is It Difficult to Get a Loan Without a Bank Account?

Getting a loan without a bank account is difficult because it causes lenders to have a harder time verifying income, and sometimes delivering funds. Lenders often use what is called Instant Bank Verification (IBV) to confirm that people who apply for loans have the means to pay back their balance. This involves looking at a borrower’s bank account history and confirming that income is being deposited into their account on a regular basis. Without IBV, lenders may not have a way of confirming whether an applicant is going to be able to pay back their loan. This is why it is almost always a basic eligibility requirement for borrowers to have a bank account in order to get approved for a decent loan. 

IBV also allows borrowers to receive their loan money via direct deposit, which is always the fastest way to get paid after loan approval. 

Types of Loans Options Without a Bank Account

There are some types of personal loans borrowers may be able to access without having a bank account. They include: 

Payday Loans

Payday loans are a type of high-interest loan people generally use to supplement income while in between paychecks. Lenders usually expect people to repay their payday loans within about two weeks or less, otherwise borrowers are stuck with expensive interest rates and possibly other fees. While payday loans may not require a bank account, they come with many other disadvantages that often leave borrowers with more debt. 

Title Loans

Title loans are a type of secured loan that uses the borrower’s free-and-clear vehicle title as collateral. While car title loans may not require borrowers to have a bank account, they do require that borrowers own a vehicle outright. During the terms of the title loan, lenders are signed onto the borrower’s vehicle title as a lienholder, which means the lender has partial ownership over the borrower’s car. After borrowers pay back their loan, they can get their vehicle title back from the lender. But, borrowers who fail to keep up with their monthly payments or default on their title loan risk having their car repossessed by the lender. 

Pawn Shop Loans

A pawn shop loan is a type of loan where people get money by exchanging some of their own property with a pawn shop. For example, people may offer valuables such as jewelry, collectables, or precious metals in exchange for a pawn shop loan. During the terms of the loan, the pawn shop will maintain ownership over the borrower’s collateral. After the loan is successfully paid back (plus interest and fees), the borrower can regain ownership of their property. 

Cash Advance

Cash advance loans are a way for people to borrow money using their credit cards. Borrowers withdraw money against their credit card limit in order to access cash, which is why these loans are often referred to as a credit card cash advance. 

If you don’t have a credit card, you may also be able to access cash advances via financial apps, but beware that these lending options often come with high rates, hidden fees, and short repayment terms. 

Pros and Cons of Loans Without a Bank Account

All loan types come with pros and cons borrowers should carefully consider before submitting an application. Check out some pros and cons of loans without a bank account below. 

Pros

Some advantages of loans without a bank account are: 

• Accessibility and convenience: No bank account requirement means just about anybody can get approved for these types of loans. 
• Speed and efficiency: Lenders may boast about “instant funding” or “guaranteed approval.” 
• No credit check: Lenders may not require a traditional credit check, which is usually an attractive attribute for people who may have bad or no credit. 

It’s important to note that virtually all of these advantages can be found with other safe and more affordable types of loans that may require a bank account. 

Cons

There are also plenty of disadvantages that come with loans without a bank account, which arguably outweigh any possible benefits. Some risks of loans without a bank account that everyone should be aware of are: 

• High rates and fees: High interest rates and fees make these loans expensive to repay, which many leave the borrower with unaffordable monthly payments. 
• Short repayment terms: Short terms can cause loan repayment to be stressful, extremely expensive, or both. 
• Risk of debt cycle: Unaffordable payments and unfavorable terms often leave borrowers in a cycle of debt that is difficult to pay their way out of. 

Should You Get A Bank Account?

Having a bank account is a big part of becoming financially healthy and independent. Practicing good financial habits includes monitoring and tracking your purchases, budgeting, saving for the future, and maintaining an emergency fund. All of these things are exponentially easier if you have a checking and savings account.

So while you may be able to get a short-term, small-dollar loan without a bank account, it’s extremely important for your financial future to open one and learn how to properly manage it. It’s all a part of becoming financially independent. So if you don’t currently have a bank account, we would highly recommend opening one.

How To Open a Bank Account

Opening a bank account is usually very simple. You can go to a storefront location, or sometimes even open one online or over the phone. Many banks may even allow you to open a checking account without an initial deposit. This means you could potentially open one for free. Although some will require a deposit to start your account.

Once you open your new account you can start using it immediately. You can set up direct deposit so your paychecks go straight into your checking account. Not having to worry about cashing checks or depositing physical checks can make life much easier. Instead of trying to cash a check with your birth certificate you can just deposit it directly into your bank account. You can also probably get savings accounts for free as well. This is a great way to start saving and build up your emergency fund to avoid small-dollar loans in the future. Which is a big step on your financial journey. Emergency funds can help you pay for unexpected bills, medical bills, car repairs, children’s school costs, and more.

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