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If you don’t have a bank account, you’re not alone: Millions of American households fall into the unbanked category. However, that can be a barrier if you’re looking to take out a loan from a bank. Many banks require your banking details for income verification to approve loan applications.
That said, some lenders like Citi may not require banking information for loan approval.
Let’s explore why lenders may or may not require a bank account, other loan options, and their risks.
Lenders use bank account history (often in the form of bank statements) to verify your income and understand your cash flow. Ultimately, lenders want to understand their risk and make sure that you’re able to make the proposed loan payments. If you have a bank account, this process is much easier because it gives them a direct view into your finances.
Your bank account details can also tell lenders where to send approved loan funds. Some Personal loan lenders, for example, may require direct deposit details.
Your loan options may be limited without a bank account if a lender requires it for income verification. Below are some financing options that usually do not require a bank account:
A payday loan is a high-cost, short-term loan. Repayment is typically required by your next paycheck, which may be 2 to 4 weeks after receiving the funds.
Fees for payday loans often equate to triple-digit annual percentage rates (APRs). Many states limit how much payday lenders can charge (for example, $20 per $100 borrowed). Loan amounts may be limited to $500 or less. Still, due to the structure and fees of payday loans, they can lead to a cycle of debt that’s difficult to get out of.
Citi does not offer payday loans.
Title loans are a type of secured loan that uses your car as collateral. That means missing payments could lead to losing your vehicle. Usually, you must repay this type of loan within 15 or 30 days.
Title loans may come with origination and loan processing fees which can increase the cost of borrowing. In fact, the finance fees can be high, and may mean paying an APR equivalent to about 300%.
Citi does not offer car title loans.
Some lenders may not have the bank account requirement for a loan approval, but you’ll still need to meet other requirements that usually include providing proof of income and a government-issued ID, as well as documents related to your collateral, if required.
Getting a loan without a bank account may limit your lending options. For instance, a lender could require it as part of their income verification for approval, or you might only be able to repay the loan via cash or a prepaid card which some lenders may not allow. That can be tricky.
There can be other concerns, too. You may come across predatory lending practices with short-term loans that can lead to a debt cycle. It may also cost you much more to borrow due to the higher interest rates or fees these types of loans typically offer. If you choose a secured loan, such as a title loan, missing payments could mean losing your collateral.
While it’s possible to get a loan without a bank account, it may limit your options with some lender who require it as part of their approvals and income verification. Plus, alternative high-risk loans typically come with higher costs. If you go this route, it’s good to keep an eye on the loan terms, so you understand the overall cost of borrowing money.
Regardless of whether you decide to take out a loan, opening a second-chance bank account can be a smart move, paving the way to a better financial future.
Citi offers personal loans to both existing Citi customers and new Citi customers that meet specific eligibility criteria, including an established credit and income history along with additional factors determined by Citi. If you think you could benefit from a Citi Personal Loan, apply online today.
If you are approved for a personal loan with Citi, you can get your funds the same day with a Citi deposit account, or up to 2 business days for a non-Citi account when using direct deposit. Or, you can select to receive a check by mail in approximately 5 business days.
This article is for general educational purposes. It is not intended to provide financial. It also is not intended to describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.
