Is it worth it or should you look elsewhere?
If you need money to cover an unexpected bill or need to borrow money but your credit is poor, you may want to consider installment loans or loans without a credit check. They can be a quick form of financing, especially if you choose loans online without a credit check. Used wisely, they might even help you rebuild your credit.
Before signing on the dotted line, understand what the loan terms are, how they differ from Credit Check Loans with Credit Check or Hard Credit Check Loans, and what will happen if you choose to take out a loan. staff without a credit check.
What Are No Credit Check Loans?
A FICO score of 620 or less is considered below average, making it difficult to qualify for many conventional personal loans. You may already know that there is a variety of loan products that do not require a credit check. These loans often require payment within 15 to 30 days. Borrow with caution – interest rates can be called fees and can go as high as 400%.
Types of loans without a credit check include:
- Payday loans
- Securities lending
- Online Loans Without Credit Check
Learn more about loans without a credit check to see if it is right for your financial situation.
Payday Loans Without Credit Check
Payday loans are loans in which you write a check for the loan amount with a fee included and then the lender gives you the money for the loan. On your next payday or within a specified time, you must return the amount of money to the lender and you will receive your uncashed check. If you don’t bring the money back on time, your check, along with the high fees, will be cashed. You will always be paying a high amount in fees, so try to find an alternative to payday loan before choosing one.
Title loans use a car title as collateral for the loan. You may be able to borrow more money than with a payday loan, but payment is still due within 15 to 30 days. If you don’t pay back the money, you could lose ownership of your vehicle.
Online Loans Without Credit Check
Online installment loans require you to make monthly or weekly payments until the loan is paid off. Your payments can be interest only with a lump sum payment at the end for the remainder of the loan.
Benefits of personal loans without a credit check
One of the main advantages of a loan without a credit check is that the process can be done very quickly, often in a matter of minutes or hours, because the company will not do a check on your credit. The only requirements are your ID and proof of income. People often turn to these types of loans when they are in financial dire straits and have running out of other options.
Disadvantages of personal loans without a credit check
One of the disadvantages of these types of loans is the higher interest rate that you end up paying. Interest could be as high as 400% APR, which is much higher than what you would pay if you borrowed money from a credit card or took out a personal loan.
Additionally, people can get trapped in a cycle of using payday loans as they have to keep using them to cover the bills for the next month as the full amount is due at the start of each pay period. No online credit check loan can require low monthly interest payments, with just one big lump sum payment at the end. If the borrower cannot repay it, then they can borrow money again and start the cycle again.
The example below shows how much more you might have to pay with a no credit check loan compared to other options. Imagine taking out a two-year $ 3,500 loan calculated with a standard amortization schedule. Loan Option A and Loan Option B are both offered by lenders who are considering credit; loan option C comes from a lender without a credit check.
|Borrower’s credit||APR||Monthly payments||Total payments|
|Excellent||6%||$ 155.12||$ 3,722.93|
|Poor||36%||$ 206.67||$ 4,959.98|
|No credit check required||400%||$ 1,167.84||$ 28,028.12|
Alternatives to loans without a credit check
While no credit check loan seems to be the best solution when you have an emergency, they should be avoided, especially if you need them periodically. Consider the following alternatives.
Personal installment loan
One option is to request a personal installment loan with a credit check through your bank or online. Even if your credit is poor, personal installment loans offer better rates than payday loans.
Loans from friends and family
You can also borrow money from friends or family. However, make sure you can repay a loved one to avoid putting them in a bad financial situation and straining the relationship.
Having a credit card as a backup in a financial emergency can be a lifeline. Using a credit card could cost you less interest and allow you to make payments over time with less exorbitant interest rates.
Before taking out a loan, check to see if a payment plan option is available. Some companies and many hospitals are willing to work out a payment plan with you so that you can cover unforeseen bills without taking out a payday loan.
If you decide to search for installment loan options online, look for a low interest rate. A credit check loan will come with a better interest rate than those that don’t require a credit check, making it easier for you to pay off the loan and get out of it financially. Finally, set a budget to control your spending and try to put money aside each month to help cover emergencies.
Cynthia bowman contributed to the writing of this article.
This article originally appeared on GOBankingRates.com: No Credit Check Loans: Are They Worth It Or Should You Look Elsewhere?