For those with bad credit, finding out you can get a loan with no credit check may sound like the perfect solution to a financial emergency. What most don’t know is that these loans makeup for their convenience with sky rocketed interest rates, fees, insufficient credit reporting, and sometimes may even be a scam. It’s essential to understand these types of loans, how to differentiate legitimate lenders from scammers, and how to find better financing options.
What Are No Credit Check Loans
While there are many loan companies that specialize in working with bad credit borrowers, no credit check loans are not in that category. Lenders that offer no credit check loans do not perform a formal review of credit reports and consider other financial aspects. They may look at proof of employment and checking account, but some lenders may not even bother with either.
These types of loans include payday loans and auto title loans. Bank account information, proof of current income, and a valid phone number are generally the only requirements. They tend to have short repayment periods, ranging from a few weeks to one month. Payday loans usually need to be repaid by your next payday. Auto title loans are secured by the title of your vehicle.
If you have an emergency and need immediate funds, no credit check loans may seem like a helpful option. The approval process is usually quick and the funds are transferred immediately. However, it’s important to keep in mind all the terms, as many of them are not so helpful in the long run.
Why You Should Avoid No Credit Check Loans
When a lender doesn’t perform a credit check before approving an applicant, they’re taking a huge risk. This is why high interest rates and fees should be expected in return. Payday loans, for instance, can come with finance charges that range from $10 to $30 for every $100 you borrow, amounting to an annual percentage rate of up to 400%, or even more.
With high interest rates, fees, and short repayment periods, many get stuck in a never ending cycle of debt, getting forced to take out more loans just to make payments on past ones. Not to mention with an auto title loan, you may even lose your car if you can’t repay the debt.
Many lenders also do not report to any of the three major credit bureaus. Meaning that even if payments are made on time and in full, it won’t help your credit score. But the Consumer Financial Protection Bureau reports that even though no credit check loans don’t help your credit score, they can hurt your score if you fail to pay. That’s because the lender can sell the debt to a collection agency, which would, in turn, report your delinquency to the credit bureaus.
Lastly, no credit check loan offers are often scammers in disguise. Scammers try to capitalize on bad credit borrowers, knowing they need quick money and getting a credit check loan would be difficult. These scammers are not interested in your credit history and instead only require personal information such as social security number or bank account details. Sometimes they even ask for an upfront processing paperwork fee. Other signs to look out for include: loans offered over the phone, the lender isn’t registered to operate in your state, or being asked to send payments to an individual.
Better and Safer No Credit Check Loan Alternatives
Many online lenders specialize in working with bad credit borrowers without charging outrageous interest and fees. Although credit checks are performed, they’re generally soft pull checks, which do not affect credit scores.
Here at Total Loan Company we consider all applicants and encourage anyone to apply. We are a reliable company, with 24/7 customer support, full data protection, and absolutely no extra fees, you always know what you pay. We take pride in providing fast, friendly and compassionate service and design our loans to get our borrowers back on their feet.
We want to help! So apply here today!