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A no credit check loan is a loan that is granted to the borrower without the lender undertaking an in depth full analysis of your past credit history.
Some people will be cautious to having a credit check done, and it is understandable that they would be, we cannot blame them. There are a variety of reasons for this, some people have a financial history that is poor, while other people may have made mistakes that have impacted on their finances. In these circumstances, it is an understandable worry that having the outcome of your credit check will be a declined application.
There are still lenders that specialize in offering payday loans for people with a poor credit history, but today we want to explain everything you need to know about no credit check loans.
What are credit checks?
So, what is a credit check? Credit checks are an analysis of financial information which is recorded by credit reporting agencies,
This review is intended to ensure prospective lenders can review how you managed your pas credit, and it gives them a full picture of how appropriate it is to lend you money, and how probable it is that you will repay the loan, weighing up the risk that is involved in lending to you. This will define whether they choose to lend to you, how much they choose to lend to you, and what interest rate you are likely to get as well.
The two types of credit checks available to lenders are a soft credit check and a hard credit check.
Understanding the types
Should you choose to opt for a no credit check loan, you need to know your no credit check borrowing options. There are a few options available to you and each can be used in different ways, for different things, and work in different ways. Some may be suitable for you, others may not be.
Let’s take a look at what these options are…
A common short-term loan solution for borrowers, Payday Loans offers a short-term arrangement that is designed so that you can pay them back when you get your paycheck. In a majority of cases, you repay them within two to four weeks, however, this differs per lender.
These are formulated to give you speedy cash to keep you afloat over until your next payday. However, these loans can end up being a vicious cycle, and they are often seen as being one of the worst options. They can come with high-interest rates, they can bring you into a revolving cycle of debt, and more.
These are not recommended, however, they do exist in the case that they are needed.
No-credit-check installment loans
Installment loans are also an option. With a no credit check installment loan, you will borrow a large amount of money with a view of repaying it over time through fixed, monthly installment payments. This type are typically available as a way to access a greater deal of money than a payday loan would offer, and you can use these to cover pretty much any expense that you may have.
Auto title loans
Auto title loans are a type of secured loan, meaning that they use your car as collateral to secure it. You will give the lender your car title, as collateral in exchange for borrowing money that you require, until you pay it off, they have ownership to the car. The amount that you can receive will depend on your car’s value. You can still drive your car as you repay the loan for the most part.
However, the negative side of this is that should you fail to make your payments for the car loan in time, the lender can then repossess your car.
Secured credit cards
You could fail at getting approved for a standard credit card if you have bad credit. This is where secured credit cards are useful. Some issuers of credit cards do not do credit checks for these. Instead, if you take out a secured credit card, you will make a cash deposit that is equal to the credit limit.
In the event you do not pay your bill to them, the issuer can then take your deposit.
Why are no-credit check loans a bad idea?
Although getting a no credit check loan might seem like a fantastic idea when you first think about it, most people will tell you to avoid them like the plague if you can.
They have exorbitant interests that can skyrocket and result in large payments, which can drive you into an endless, repeating cycle of debt, which can then also reap chaos on your credit. Most people will look at a no credit check loan if they already have bad credit, however, these types of loans can actually make your credit score even worse.
You may actually discover that a no credit check loan will likely do more damage to your finances, instead of helping your long term financial stability.