No Bank Account Bad Credit Loans

Updated: August 17, 2024 Author:

Specialist lenders cater to unbanked customers – that’s 1.1 million Brits! Many have bad credit loan options! 

Having a poor credit score and no bank account makes it difficult to secure a high street bank loan but it doesn’t preclude you from access to finance. Another option for cash loans is doorstep lenders, although there aren’t many left. The most widely used by unbanked people is credit unions.

What the Stats Show about Unbanked Customers in Britain

There is a large group across the UK categorised as “unbanked”. One reason is that in Britain, there is no universal right to have a bank account. It’s up to the banks and building societies to decide if they want to have you as a customer. A report about UK payment accounts in 2023 revealed that 1.1 million Brits were unbanked. Of those, 40% had savings accounts, a credit union account, or a Post Office card account, but no Current Account with a Debit Card facility. 25% used a digital wallet, and 5% used a pre-paid debit card for everyday transactions in the previous 12 months. The FCA refer to this group as unbanked.

A total of 700,000 UK adults had no bank account for day-to-day banking. That group is referred to as the “unbanked plus”. These are the people completely invisible to mainstream financial institutions regulated by the Prudential Regulation.  For borrowing, consumer credit is regulated by the Financial Conduct Authority and within those companies, there are lenders that do provide alternative lending options specifically for the financially excluded because they don’t have a bank account, or have a bad credit score. Specialist lenders cater to both situations. 

Bad Credit Loan Options for People with No Bank Account

Pawn Loans

If you are in need of an emergency loan, you can approach a local pawn store. A few franchises operate nationally. Some offer pawn loans, others use a buyback scheme where you sell an item to them then buy it back at an agreed date. If you don’t pay on time, it goes on sale in the store. These are typically no credit check loans (other than ID checks) and usually deal in cash.

You can find a nearby pawn shop using the National Pawnbroker Association’s search tool.

How these work:

You take something of value to the store and after appraising it, the store would offer you a loan based on a percentage of the item’s value. You can borrow from £5 to several thousand pounds, however, the loan amount largely depends on the appraised value of your collateral. That’s the second-hand market value. Not the price to buy the item new as it will be sold as pre-owned if you fail to repay within the agreed timeframe. The interest rates tend to be between 30% to 165% APR.

The pawnbroking industry is monitored and regulated by the FCA. A review of the sector in 2018 revealed pawn stores lent £300 million annually, serving around 350,000 customers. Only 7 firms account for 80% market share.

Doorstep lenders 

Doorstep lenders prefer to deal with borrowers in a face-to-face manner so as to offer a more personalised service. Even though you start the loan application online or via a phone call, they will still send an agent to you to finalise the process. 

All legitimate doorstep lenders will run a check of your credit history. In most cases, they’ll run a soft check versus a hard one, which won’t impact your credit score. However, the information revealed by the check doesn’t strongly influence approval as they are often lenient towards those with bad credit, even considering applicants with an active bankruptcy, or a CCJ. If you can demonstrate sufficient income to repay the loan, you have a good chance of being approved. 

You can deal with doorstep lenders strictly by cash, so you don’t necessarily need a bank account to qualify for a loan from them. The loan amount is typically small and repayment is usually made on a weekly basis, collected by the agent.  An agent doesn’t have to be personally registered with the FCA but the company they represent does. 

Depending on the lender, the interest rate could be as high as 200% or even 1,500% APR. Following the collapse of Provident, the Morses Club, and Loans At Home, there aren’t many doorstep loan providers that are still in operation nationally. Those who are, will most likely be local.

Credit Unions

Credit unions are non-profit co-operatives established by members to cater to their own financial needs. They are known to be lenient to borrowers with bad credit and often offer cash loans, so you can approach them if you don’t have a bank account. Some credit unions offer payment acccounts letting you have your wages or benefits paid in electronically with the loan repayments taken automatically.

The only issue with credit unions is that you have to register with them first to be eligible for their loans. Membership criteria differ from one union to another and are often  location based so if you’re dealing with cash only and they’re located several miles away, it could be a lot of travel back and forth to make the repayments. 

A credit union will run a credit check before making a decision on your application. They offer different types of loans, and you can borrow up to several thousand pounds with interest rates from 3% monthly. 

Other Ways to Get Finance without a Bank Account 

Friends and family. A close friend or family member may be willing to give you a cash loan to get through a difficult period or cover an expense.  The downside is that borrowing money from them could strain your relationship.

Approach a broker. Credit brokers have a thorough understanding of national lenders, the credit profiles they have a history of approving loans on, and the types of negative entries that are likely to cause applications to be rejected. If you find yourself hitting barriers, a broker can help you navigate the lending space, assist with your application preparation, and approach lenders on your behalf.

There will be a service fee, but depending on the business relationship they have with lenders, it may be paid as a commission, or require a fee to be paid by you, sometimes upfront, with no guarantee they can get a loan because brokers cannot approve loans. They can only represent you to a lender and possibly negotiate loan terms on your behalf.