What is No-Credit-Check Loan?

EPF Last Update: May 23, 2020

A “no credit check” loan is a loan made for a relatively small amount of money. These are unsecured and are usually geared for individuals who have poor credit or a lower credit score. The trouble with having a low credit score is that it can be very difficult to obtain loans of just about any type. The term, “no credit check,” means that the lending institution doesn’t check your credit score before issuing the loan. This allows individuals to borrow money when they would not normally be able to borrow due to a poor credit history or low score.

Who Qualifies for a No Credit Check Loan?

The qualifications for applying for a no credit check loan are very lenient. The individual has to be at least 18 years old and have a regular paycheck or income of some sort. The loans are specifically designed to accommodate as many people as possible. The professionals at these lending facilities understand that anyone can suffer from financial hardship now and then and they also realize that everyone needs money. They make the loans available for individuals who cannot obtain the funding from other places.

What Types of Loan Terms are Offered?

There are different loan terms that depend a lot on the region in which the loan is obtained. Each state has its own laws regarding lenders so you will need to research a little to find out the precise terms in your area. Typically, loan amounts are $500 or below because they are designed that way. When the loan is set up, you are given a date by which the loan must be paid in full along with the interest charged. This is usually based on when you get your next paycheck. So if you borrow $300 you have approximately 2 weeks until you must pay back the initial amount borrowed plus interest. If you choose to pay it back on multiple dates you may also be charged processing fees. However, if you pay it off earlier you can save a little bit of the finance charge. And of course, as is typical with any type of loan, if you pay it off after the due date you will be charged an additional late fee. It’s a short term loan for a small amount; and there is a short window in which to pay it back in its entirety.

What Types of Reasons Make People Obtain a No Credit Check Loan?

There are several reasons that people take out a small loan such as the no credit check loan. They may need to pay a bill in order to avoid a suspension of their account, make a car payment or have some other type of emergency. Some people prefer getting a quick loan in order to meet other financial obligations to avoid late fees or penalties. For many it means avoiding having an insurance policy cancelled or huge fees for paying late. In other instances, people experience a family emergency and need to have money on hand to make a necessary trip to tend to a loved one. Sometimes a trip is in order to go for a job interview. There are lots of reasons people choose to obtain a small and quick loan such as a no credit check loan.

What are The Advantages of No Credit Check Loans?

There are many benefits for individuals who take out a no credit check loan. The primary benefits include:

  • There is no credit check

You do not need any established credit to obtain this type of loan. This means that even if you have poor credit or no credit history you can still get the finances you are needing. You do not have to worry about being turned down because you “don’t qualify.”

  • The process is fast

There is no waiting period and you can get your money in as little as 15 to 20 minutes in most cases. You basically go in and fill out the paperwork, give them access to your bank account and walk out with the money.

  • You do not need any collateral

There are some loan programs which require collateral before they will lend you money. With a no credit check loan you should not have to offer any collateral in exchange. This simply means you are able to get the money that you need without offering them a title to either your car, house or other valuable assets.

  • It is a way to improve your credit score

You might ask how this type of loan that does not use a credit check to issue the money can help improve your credit score. If you are using the quick cash to pay off other debts such as a mortgage or credit card payments then you can help protect your credit score from falling due to late or missed payments. So even though they do not perform a credit check it can help your credit score in the long run. Applying for a lot of loans can also damage your credit score if you are asking too often. Each time your credit score is obtained to determine if you are eligible for a loan or not can be a blemish on a substandard credit report. Since these lending institutions do not check your credit score it actually serves to protect it.

What are The Disadvantages of No Credit Check Loans?

For some people a no credit check loan is the perfect solution to a financially tight situation. However, there are a few disadvantages to be weighed to determine if obtaining on is right for you.

  • The interest rates are high

Even though it is a convenient and fast way to obtain the funds needed, you are looking at a much higher than average rate of interest. You can actually be paying something like 200% APR even though you might not realize it since it is over such a short amount of time.

  • It can complicate an already difficult situation

When an emergency cash loan is obtained it seems to solve an immediate problem. However, it can make a difficult situation even worse. Once you add on the fees and interest it can come up to a substantial sum of money. If you are having difficulty just making it to payday, a quick cash loan can make it more difficult in the long run. It means when you get your next check you’ll have to take a huge chunk out first to pay the loan back. This can end up in a cyclical financial crisis situation if you are not careful.

  • It’s easy money

What this means is that when you can get money quick and easy you might not use the loans correctly or as they are intended. Rather than using them solely for emergencies they might be used to buy things that are not really necessary since you have the money in hand.

  • Lenders are unsecured

When you take out a loan at a bank or other secured lending facility, you are insured they are legitimate and are not in business to harm others or cheat them out of money in unethical ways. No credit check lenders are unsecured. Which puts the risk back on you as the borrower. You are taking a chance when you obtain a loan. Make sure the lender you choose is reputable before filling out the paperwork to avoid a scam.

Should I Get a No Credit Check Loan?

This is a question that only you are qualified to answer. A no credit check loan can be the perfect solution in a tight situation, but if they are not handled correctly they can be hazardous to your financial situation. In some instances, you just need a small loan to get by and if you are not having to pay these small loans back every single paycheck then you are probably handling it responsibly. But if you are having to take every paycheck in to the lender you may need to pursue some sort of financial or debt counseling. On the other hand, if you are just using them occasionally to meet an unexpected need they will not hurt your credit rating and can be beneficial for helping you get by. Once you establish a relationship with a reputable source, they will gradually increase the amount you can borrow. This can be useful if handled correctly.

There are two ways to look at it. If you are already sinking financially, getting too large of a loan can make you sink faster. But if you can handle the loans appropriately, they can be just the fix you need to get back on the road to financial recovery. Handled responsibly, loans can help you through a temporary financial crisis.

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