Financial emergencies always arise, and most people do not prepare for such situations. According to a recent survey, almost half of Americans have poor credit scores and more than 57% have less than $1000 in their savings account. If you get in a situation that requires urgent funding, getting instant cash may seem to be your last resort.
However, qualifying for a loan is never easy and if you have a poor FICO score. You may already know that hard inquiries can negatively affect your credit score. This may not come as good news for those with bad credit scores. The only option is to apply for a no credit check loan from an alternative lender. No credit check loans can offer short term financial solutions before you get your next paycheck.
A no credit check loan is a type of funding (mostly offered by online lenders) that does not require a credit check. As early stated, too many hard inquiries on your credit report can hurt your credit score. These inquiries indicate that you are applying for a lot of loans and maybe you are not responsible with money.
When it comes to no credit check loans, the lender does not check your credit history. Lenders charge interest and some additional fees on the loan. Unlike traditional financial institutions like bank and credit unions, payday loan lenders are only concerned with your ability to pay back the debt. The main requirements for a no credit check loan include;
Most people can easily meet the requirements, which makes it easier to qualify for funding.
There are many reasons that attract consumers to payday loans and other forms of funding that do not require a credit check. If you do not have enough collateral, there are higher chances that you won’t be approved for a bank loan.
On the other hand, it is much easier to qualify for online loans with no credit check. The best part of it is that you can get approval in as little as one business day. The main benefits of applying for no credit check loans online include;
Applying for a no credit check loan can come in handy when you need to cover for expenses that fall between the middle of the month and your next payday. The funds can help repair an important appliance at home, buy foodstuffs, or even pay your rent when it is due.
You can apply for a payday loan and get the funds within the same day. This, however, depends on certain factors like the lender you work with, the maximum loan amount, among others.
A no credit check can also be a good option for loan applicants with poor or no credit scores. You can easily qualify for the loan, provided you prove your ability to repay the debt
The loans can also be used for a wide range of purposes. This is contrary to other online loans like auto loans, home equity lines of credit, and SBA loans that are used for a specific purpose.
There are several precautions that you should take before applying for a no credit check online. By now, you already know how handy these loans can be. The most important things to consider in online loans with no credit check include;
Since no credit check loans are designed for consumers will less than perfect credit scores, be prepared to pay more interest compared to other types of loans.
While a bank installment loan attracts an APR of only 6%, no credit check loans have an APR of between 150% and 100%. If for instance, you take a bank loan of $1000 with a repayment period of 5 years, you will only pay interest of $140. In the same scenario, a no credit check loan will have an interest rate ranging from $6500 to $8960.
This illustration clearly shows how expensive the loan can be. Some lenders are only there to take advantage of your situation and lead you to a cycle of debts. It is, therefore, imperative to compare the interest rates from different lenders and only work with one who offers better loan rates.
Whether you apply for a traditional loan or a no credit check online, you may have to pay the origination fees. However, the amount you pay for online loans may be more. Some lenders may charge a prepayment penalty if you happen to pay off the debt early.
No credit check loan may also have a longer repayment term. Generally, a longer repayment term equals to lower monthly payments. But this can also be a curse in disguise. What you need to know is that loans with a more extended repayment period have more interest compared to short term loans. If you feel that a loan with no credit check online is an option worth considering, beware of lenders who deliberately increase the loan term to benefit from the interest rates.
Once the loan matures, payments are automatically withdrawn for your bank account every month until the debt is paid in full. This may lead to another problem if you fall into a trap that requires quick funding. There are chances that you will incur an overdraft, and the lender will charge an extra fee for the returned payments.
While a no credit check is useful in solving short-term financial problems, the funds may not benefit much if they lead you in a debt cycle. Some lenders only offer the loans to make profits, knowing that you might have challenges paying the funds back. When applying for a loan online, ensure that the loan lender performs a soft credit check. Such lenders are known to be safe to work with and will only approve you for funds that you are comfortable to pay back. Lastly, ensure that you only use the funds to cover short term financial problems.