No Credit Check Loans | Fast Cash
The Alarming Truth about No Credit Check Loans
Do a search on the internet for no credit check loans, and you will be bombarded with all types of offers. From approvals in ninety (90) seconds to depositing up to $10,000.00 in your checking account in a matter of a few hours.
Individuals that have low credit scores, and/or bad payment records, are the ones that these online lenders seek out. Unfortunately, these same individuals are the ones that usually need emergency type loans, and they are often caught in the short term borrowing cycle.
Does the term “payday loans” sound familiar? That terminology was used for a short time, and then changed to various names that we see today. Some of the same repayment terms are used, i.e. 14 day loans to coincide with a borrower’s pay period.
Many of the online lenders still advertise no credit check loans, but many in fact do run a credit report so that they will have some idea how a prospective borrower handles credit obligations. They will generally use that payment record to establish the interest rate on the loan.
Their advertising can make the online no credit check loans appear to be attractive, so be extremely careful. Get hooked up with the wrong firm and sign quickly, and it will come back to haunt you for a very long time. We would never recommend any of these lenders, but if you feel that this is your only choice, please understand the risks. [bctt tweet=”No credit check loans can appear to be attractive, but beware of the risks. Interest rates are sky high.” username=”HBSMoneyTips”]
Extremely High Interest Rates
Understand that any lender in this industry is taking a high risk making loans to individuals with no credit history or a bad payment history. They compensate for that risk with interest rates that make the Mafia look like choir boys.
Here’s a simple example: You borrow $1,000.00 for a 14 day period, and the lender charges you $150.00 finance charge. Doesn’t sound all that good, but perhaps it’s not too bad. You think this is probably average for a short term loan that is repaid from your next paycheck, and it is. The APR (annual percentage rate) on this loan example is 391.08%. And believe me, many of the interest rates charged are in the 1,000% range.
Some of these online lenders with no credit check loans also slip in setup fees or other fees to increase their profit and to compensate for loan losses on unpaid loans. When you add these fees in with the finance charge, the interest rate goes through the ceiling. If you absolutely must use this type of lender, read the fine print carefully and ask a lot of questions.
You will also need to inquire if a particular lender does business in your resident state. Usury laws vary from state to state, and if one of these lenders with no credit check loans can’t legally charge you the rates they want, they won’t do business in your state. I did a sampling of ten different lenders and none of them did business in my state. The maximum interest rate that can be charged in my state is 24%.
If one of the reasons for you having bad credit, was for instance, a lot of medical bills that you were having a difficult time repaying, then a debt consolidation loan would make sense. However, most of the online lenders with no credit check loans don’t make loans beyond $10,000.00 and not longer than three years.
However, with the high interest rates they charge, and the many fees that get tacked on, it wouldn’t make sense to borrow from these online lenders. Try borrowing from a friend, relative, or perhaps using a strong co-signer at a local bank.
Offering more money than requested
Be very careful when this happens. Some of these predatory lenders will do just that to lock you into a long term relationship. Then the fees begin…late payment fees, extension fees, paying the loan back too early fees, and a myriad of other fees. Their primary motive is to lock you in, knowing you’ll never be able to repay the loan, and suck all the money from you that they can. At last count there were about 43 states that permitted some form of these online loans with no credit checking.
The online no credit check loans were designed to be a fast source of emergency funds for a short period of time. Even though the lenders don’t rely on a credit report, they still require a borrower to have a source of income, be a US citizen, social security number, home address, e-mail address, a checking account, telephone number, and some require a valid driver’s license.
The more information that the lender has, the easier it is to find you if you don’t pay on time. We realize that some individuals must resort to this type of financing, but in good conscience, cannot recommend using it.
All that we are trying to point out are some of the pitfalls and many problems using online no credit check loans. If you must use them, please check out the lender and read all of the fine print very carefully.
Gust Lenglet is the CEO of HBS Financial Group, Ltd., an accounting & tax preparation firm in Maryland. He has more than 25 years of experience in the banking and financial industry. Gust started his career as a loan officer at a major national bank, and then moved on to become controller of a major law firm. In recent years, he has written many financial articles that have been published on Ezine Articles and many websites.