Why are No-Credit-Check Loans dangerous?
Sometimes people have damaged credit, and if they need money fast, ads for no-credit-check loans may seem tempting. While you may think them a perfect solution for your financial problems, it’s better to avoid them. No-credit-check loans are very expensive. So much so that they can leave you in a worse position than you started. Thankfully, there are several better options you can use if you need fast cash.
A no-credit-check loan is just what it sounds like. Most loans require a credit check. That’s a precaution for lenders, so they can see how well you’ve managed past debt. They use this information to help qualify you for a loan, as well as establish your interest rate.
On the other hand, no-credit-check loans are given out based on debtors’ ability to repay the loan. Lenders can also check your bank account statements or past pay stubs, but only with the aim to see how much you earn with each paycheck or how much loan you can afford.
Furthermore, some no-credit-check lenders require a debtor to pledge collateral. It may be a personal asset you use to secure a loan. One the lender can repossess it if you fail to meet the repayment terms.
You might need to leave something of value with a pawn shop if you want to get a pawn shop loan. When you repay the loan, you’ll then get your item back. That works the same in different cases. For example, auto title loans are another type of no-credit-check loan. You have to leave your car’s title with the lender until you pay off the loan.
Who are the lenders of no-credit-check personal loans?
No-credit-check loans less common than traditional loans. Nonetheless, you can apply for one through various institutions. For example, payday loan stores. Such loans usually last until your next paycheck. They also charge extremely high-interest rate. If you can’t pay it, they offer you to roll your current loan into a new one, but for an even higher price.
Auto title lenders are another type of such institutions. These lenders will trade you an expensive loan for your car’s title. They can be found online, or they may have storefronts in your community.
Online lenders are also quite common in that business. Some of them don’t specifically offer payday loans or auto title loans. However, they still offer no-credit-check loans.
Pawnshops also qualificate as no-credit-check lenders. While Pawn shops sell items, they give out short-term pawn loans as well. They’ll give you a ticket with your cash. You’ll need to return it when you repay the loan in order to get your pawned item back.
No-credit-check Personal Loans pose a danger. Why?
No-credit-check personal loans are convenient. However, they can be dangerous in some cases. You should know several things before applying for one.
Such loans are extremely expensive. Unfortunately, if you don’t have great credit, you’ll have to pay more for any loan than someone who has better credit. However, if you’re comparing regular loans for bad credit with no-credit-check loans, it’s a difference of whether you prefer a high rate or a sky-high rate.
Furthermore, payday loans usually last only until your next payday. As a result, term lengths are generally about two weeks, not six months. It means that you have to pay higher amounts of money in a much less period.
Payday loan lenders know these loans are expensive, and you may not be able to pay. If you can’t pay your loan back, they offer to roll it up into a new loan. As a result, you’ll get an extension for an additional fee, which may become a never-ending and expensive circle. Furthermore, no-credit-check loans may be scams, in the sense that they rob you of your money right away.
Thankfully, there are some alternatives to No-credit-check loans. You can safe up and build credit or seek help from a charity. You could also try to get help from a credit counsellor to apply for secured personal loans.
