Many rely on no credit check loans when they are in need of immediate financial assistance.
People with poor credit especially take advantage of this type of loan due to its easy approval and repayment plan.
However, while these loans might sound appealing and expedient, they may not be the best safeguard for your finances.
Read more below and find out whether no credit check loans will help or hurt your financial success.
How Good Are No Credit Check Loans for Your Finances?
How Do No Credit Loans Work?
No credit check loans run similar to lenders of car titles and payday loans.
Looking into these loans, many charges on average an interest rate as high as 200%.
However, even for these no credit check loans, in order to qualify, a borrower should have a bank account and a regular paycheck coming in.
Still, oftentimes the lenders of this type of loan don’t actually look into the ability of the borrower to pay.
Instead, a lender can withdraw the payments electronically straight from the bank account attached to your loan application.
No credit check loan lenders also do not conduct a credit check prior to the application for the loan.
This will not affect the credit score or the credit report which means it also won’t help in building credit.
Advantages of No Credit Check Loans
1. No Collateral Required and Fixed Interest Rates
Lenders do not require a collateral, nor any information pertaining to the purpose of the loan application.
In addition, the interest rates remain the same all throughout the loan term.
This is a huge advantage for borrowers trying to avoid fluctuating rates on top of the amount borrowed.
However, this may vary from one lender to another.
There is also a very high acceptance rate with zero additional application fees.
2. Approval Is Faster
No credit check loans do not require a good credit score.
Additionally, they don’t involve tedious paperwork.
Applications run online and decisions don’t take long which is great if you’re in a financial emergency.
Lenders also offer no credit check loans during extended hours.
All of these facts set them apart from traditional banks which take a long time to set up a meeting.
Disadvantages of Getting No Credit Check Loans
Digital lender SoFi, a fave of millennials, moving into traditional #banking https://t.co/OCF10FIYIQ pic.twitter.com/G4SvgJ4tVc
— Cisco FSI (@CiscoFSI) June 21, 2017
1. Considered as High-Risk
No credit check loans are very expensive loans.
Compared to traditional lending which helps you build credit, as stated above, no credit check loans don’t build credit.
Traditional lenders’ fees and interest rates are also lower.
While most lenders offer an unsecured loan, you have to make sure that this is truly the case in order to take advantage of the no credit check loans.
2. It Can Be a Scam
Oftentimes, lenders offering no credit check loans are too good to be true.
Although there are some legitimate no credit check loans, a majority of these offerings are scams which charge fees for non-existent services.
When trying to figure out if something is a scam, pay attention to any application fees you haven’t heard of before.
No fees should be deducted prior to your loan approval.
Also, be wary of lenders who ask for valuable information such as your social security number, which can be used for identity theft.
Keep in mind that providing your social security number is unnecessary since no credit check loans do not require checking of your credit score.
3. Getting Stuck in a Cycle of Debt
Some borrower fall into an endless cycle of rolling over or borrowing loan payments all over again.
This occurs when the borrower cannot pay on time for the principal of the loan.
Eventually, the debt piles up due to high-interest rates and short payment terms which usually range from a couple of weeks to a month.
This cycle can trap a borrower in debt for a long period of time.
For more on no credit check loans, watch this video from TED:
Applying for no credit check loans should be done if and only if it is the only option available.
Although there are legit lenders of this type of loan, you’ll need to do your own thorough background check on all the lenders you can find.
In addition, look for other alternatives if you need cash immediately.
You can try the credit union, online lending, or a credit counselor.
At the end of the day, it’s best to find an option that improves your credit score and will help you get better rates and payment terms.
What other information do you have about no credit check loans? Feel free to share your expertise in the comments below.
Up Next: 8 Ways to Get Out of Debt
