How Does a No Credit Check Loan Work?
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You finally paid off your last bill. You are no longer in debt. You think it's high time you got a small loan so that you can buy a few extra presents during Christmas. There's only one problem: your credit history is as spotty as a leopard. No bank is willing to give you a break! So what can you do instead? Apply for a no credit check loan. It seems like a tempting idea, but there are a few things you need to know about no credit check loans first.
How the No Credit Check Loan Works
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No credit check loans (sometimes known as payday advance loans) promise to make it easier for everyone to get a loan. No credit check lenders can also get you the money faster than traditional lenders because they promise less red tape. However, these loans do not come without a cost.
No credit check loans tend to have a high annual percentage rate (APR). The APR is the percentage of the loan you will pay as interest to the lender. Let's say the loan is for $5,000. At a 25 percent APR, you would end up repaying an additional $1,250 on top of the original $5,000. This is because the loan is not secured by anything like collateral. For a traditional loan, you are sometimes asked to put up something like the title to your car in order to ensure the lender you will pay back everything as intended. Sometimes the no credit check lender will require that you give them permission to take their payments straight from your checking account. -
Length of the Loan
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Another issue with no credit check loans is the length of the loan. Some lenders would require a 5- to 10-year repayment plan, charging you monthly interest. If you only plan on borrowing a small amount, paying back a loan over 10 years can be like a credit card bill that never ends.
Before you decide to take a no credit check loan, make sure you weigh all your options carefully. You may be better off borrowing from a traditional lender, a friend, or even a credit card with a low interest rate or no-interest for a certain time period.
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