About Short-Term Loans With No Credit Check

Short-term loans with no credit check are more commonly known as payday loans. They are extremely expensive and should only be used in true emergencies. The interest rate on some payday loans exceeds 500 percent.

Function

You do not need a credit check to get a payday loan. All you have to do is show the lender that you have a source of income, like a job. For this reason, payday loans are popular with people with bad credit or no credit history.

Identification

Groups that commonly use these types of short-term loans include recent immigrants, military personnel, individuals with very low credit scores and recently paroled criminals. These people have a hard time qualifying for more traditional forms of credit.

Function

To get a payday loan, an individual goes to a lender and asks to borrow a certain amount of money, usually for one or two weeks. In exchange, they give the lender a check to cover the amount borrowed, plus the lender's fee. When the term of the loan is up, the borrower must repay the money, or the lender cashes the check.

Benefits

For people who cannot get any other type of credit, payday loans can be a great help, for example, if the person's car has broken down, and he desperately needs to get to work. A short-term loan can help him repair the car and avoid losing his job.

Warning

The biggest drawback with this type of loan is the cost. Some states have banned payday loans because of extortionate interest rates, though lenders can still find loopholes.