No Credit Check Loans: Don’t Overlook the Risks
No credit check loans can be a lifesaver for those who have a low credit score. Some Aussies who have a low credit rating do not have access to many types of loans or other banking services, so the fear of having a low score is real among many borrowers. As more and more finance companies pop up, it’s harder to tell which service is honest and trustworthy, and which are just after a paycheck. Although no credit check loans can help a borrower with financial problems sort things out, if you are not careful with the service you choose, you may be caught up in many traps that Aussies do not know about. Let’s take a look at a couple of them.
What Are No Credit Check Loans?
No credit check loans exist solely to fund a borrower’s needs without having his/her credit status verified by the lender or the financial institution. However, these services do come with an approval process, so even if you have a low credit score, you still need to have a decent financial history. For example, when applying for a no credit check loan, the lender will analyse your current debts, your previous debts, your employment history, your income and other factors to determine whether you are eligible or not. A lender will always do that, especially if you have bad credit. It is kind of a dead giveaway if you think about it.
Why Do People Use No Credit Check Loans?
They are great if you have to pay for an emergency, fund your vacation, use it as a payday loan and so on. No credit check loans are short-term, they are small, and they are unsecured. In other words, you will be done with them in a few weeks. These loans are also easy to apply for and the response time is short. Right after your request has been approved, you will have immediate access to this loan.
What Are the Drawbacks of Using No Credit Check Loans?
While no credit check loans are accessible on many levels, some lenders do not inform their borrowers about the downside of these types of services. In other words, you may use these loans to cover some of your debts, but you may end up creating more debt in the long run. Here are a couple of traps:
- Penalty Fees: When you apply for no credit check loans, expect your account to be set with automatic payments. The lenders will set up your account so that you won’t miss your monthly payments. If the lender wants to withdraw the monthly payment from your account and the process results in an overdraft, you will receive a penalty fee. These charges are not small and can seriously damage your financial situation if you have too many penalties.
- High interest rate: What can you expect from a lender that offers you a no credit check loan that is also unsecured? The answer is a high interest rate. Unsecured loans usually come with high interest rates but you should add the fact that these loans go to people who have bad credit. Now you will understand why these rates are so high. A combination of taxes, penalty fees, and high interest rates may put you at a financial disadvantage. In fact, if you are not careful, these elements might even make your loan too much to handle and affect your finances even more.
- Defaulting on your loan: A lot of things can happen when you get a loan and cannot pay it back. Your credit score can be affected and you might even face penalty fees. However, if you default on a no credit check loan, expect all hell to break loose. If you default on this loan, you will have your funds withdrawn from your bank account. Not only that, but any governmental fund will be taken, and your property will be repossessed. You will also be visited by debt collectors, and the nightmare won’t end until you pay the loan.
- Even more loans: If you cannot pay your loan and you are looking for a solution, your lender can “help” you. He/she may offer another loan to pay the previous one. However, the new loan comes with additional fees. Some people don’t even stop there and end up having several loans in a row. It is a dangerous practice.
- No more bank account: No credit check loans can lead to more damage. If you default on this type of loan, your bank can even close your bank account. That means that you will have to make due with debit cards that have a high fee.
As you can see, no credit check loans are only worth your time and money if you can avoid these traps. If you fall into a trap, you will do more harm than good to your financial life. If you are looking for an honest service, get in contact with the friendly team at Bad Credit Loans.
Bad Credit Loans offer valuable advice and proper solutions to your financial needs.