Your credit is a great financial tool when used well. But when handled recklessly it can taint your financial history. Getting a loan with poor or no credit history is always a challenge. And that is why good credit is crucial. But what can you do if you have no credit history or if your credit score has already taken a beating? You could opt for ‘no credit check loans’. But before you decide to take the leap, here are some basic facts you should be aware of.
1. What are ‘No Credit Check Loans’?
This is a type of loan where the lender does not check your credit score or history for approval. These are relatively short-term loans that can be obtained quite quickly. Although it sounds very simple, ‘no credit check loans’ can have big financial implications, and therefore have to be carefully considered.
2. Are these loans safe?
‘No credit check loans’ are offered in many different types. They may come in the form of payday loans, personal loans, title loans etc. Some of these loans are offered by legitimate lenders and are safe to use when you want to address your immediate financial need. But some loans offered in the pretext of no credit checks are predatory in nature and are best avoided.
3. What distinguishes a safe ‘no credit check loan’ from a risky financial product?
There is no loan that is completely safe or entirely dangerous. The difference lies in three important aspects of the loan: the APR, the repayment term, and consideration of repayment ability.
- ‘No credit check loans’ that are offered at exorbitant APRs are typically unsafe. These loans make you pay several times more than what you borrow in exchange for the privilege of getting the funds when you most need them.
- The longer the repayment term, lower is your monthly/weekly payment. Very short-term loans that come with a repayment term of 2 weeks or a month are usually riskier.
- A genuine lender will always check for the borrower’s ability to repay. This is a good indicator of safety. However, a lender who does not consider your ability to repay is likely to take advantage of your need and try to roll you over into new loans with high interests and fees.
No credit check loans can be a useful tool when you make the right choice. They come in handy especially when your credit score fails you at a time of need. It is therefore important to understand why credit matters and what steps you can take to find a safe ‘no credit check loan’. This can help you make a responsible financial choice, and prevent you from falling prey to other predatory loans that may leave you in worse financial shape.