Apparently, these loans seem like a very good option for bad credit borrowers who want quick loans. But it comes to a lot of costs too.
What is No Credit Check Loan?
These are the loans that you can get without any credit history checks. Lenders and banks check your credit reports and credit scores before approving you for loans.
However, no credit check loans don’t require that. Lenders usually look at your current income and bank account and approve you for loans at a much higher interest rate.
These loans are also called no-credit-check installment loans and usually have an APR of 400%. They range from €50 – €1000 in most cases.
High Markup on No Credit Check Loans
Because these loans are not approved by your credit reports, they usually are high in interests. Many lenders charge more than a 100% of interest rate on installments.
APR for no credit check loans is mostly 400% which is way more than APR rates of many personal loans offered to mediocre credit score holders. It is the highest APR rate offered for personal loans multiplied by 5.
Also, lenders usually force you to buy their credit cards or other things to which adds to the costs. The markup cost and lender’s fee are very high because you do not have any guarantee for repaying the loan.
Benefits of No Credit Check Loans
If we talk about some of the bright sides or advantages of no credit check loans, the biggest perk is no checking of credit reports. It is a good option for people who need quick cash for emergencies or accidents.
Lenders offer same-day funds transfer in these types of loans. So, the transfer of cash is really quick. But with all of that aside you have to look at the paperwork carefully for the interest rates and other fee charges before agreeing.
Why No Credit Check Loans Are Not a Good Option?
These are all the reasons why no credit check loans are not the best option:
No Guarantees Involved
They are predatory for people. They are the same as payday or car title loans. As lenders do not have any guarantee on you paying the amount back and make payments on time, they can easily access your bank accounts.
You Can Get Stuck in Debt
These loans are like a trap due to high interest rates and markup rates, borrowers are unable to repay the loan amount thus they get stuck in a continuous cycle of debt.
No Effect on Credit Score
No matter how well you are with your monthly installments, this will not have any effect on your credit score at all.
You should look for other options first to borrow money if you have a bad credit score. Like,
- Any relative or friend
- Credit Unions
- Online Money Lenders
- Payday Alternative
- Personal Loans
Personal loans are always a better option. Only go for no credit check loans if you don’t have any other options available and you are not eligible to apply for any other loans.