No Credit Check Loans: The Traps You Should Be Aware Of
No credit check loans are regarded by some Australians as a common financial catch. You already know how it goes. You need a loan, but your credit score isn’t pretty at all. Applying for a loan will inevitably trigger an enquiry, and you know what happens when you get rejected (or when you have too many enquires). No credit check loans promise loans without the credit check. Initially, this sounds exciting! It’s easy to get approved for one but hold your horses, mate!
There are some serious things you’ve got to consider before diving straight into the first payday lender you see. There’s more to these loans that cash without credit checks.
- They Will Impact Your Credit Score:
“But how can this be? They’re called no credit check loans!” Exactly. No credit check loans. They don’t check your credit that much is true.
What happens the instant you get one is that your credit rating will be temporarily decreased. As soon as your new account is reported to credit bureaus, you get a new debt added to your liabilities. Now, I did say temporarily. Once you pay it back, your credit score returns where it was… but that’s not the end of it.
- They Have Exorbitant Rates:
The interest rates are found within the range of 25 to 30% of the loan amount. For a one-week $400 payday loan, you’d have to pay $520. No credit check loans are rife with usurers. Expect the average lender to charge the maximum interest rate allowed.
- They’re Designed to Trap You:
Well, I can’t speak for all lenders when I say this. I’m speaking of the more unsavoury ones that will approve you as soon as you request, albeit with next-to-impossible terms. The whole thing is planned from the start. You’re given short terms with high-interest rates (and higher penalties) to put you in a vicious circle. Once you find yourself unable to pay back the loan in time (which is likely), you’re given the option of extending your loan – with a fee, of course.
At this moment, it becomes clear that the whole deal is becoming more trouble than what it’s worth. Sadly, rolling over is the only thing you’ve got left. Now begins the rollover circle. You owe more than you did in the first place. Paying back the full loan is out of the question given the costs. You descend into more debt, right until you stop paying altogether. When you miss several payments, your loan goes into collection, thus dropping your score. The first order of business will be reporting your non-payment to credit bureaus.
This is serious. The collection agency handling your debt will report an account on your credit file. This can drop your score up to 100 points!
- They’re Hard to Recuperate From:
Paying back the collection agency, despite hard, is still an option. Unfortunately, not everything will go back to normal, not immediately, at least. Your credit rating won’t improve the instant you pay back the loan to the collection agency. It can take anytime from mere months to long years.
For the most part, you will live with that damage to your credit for a considerable time.
Many scammers use these loans as a tool for their crimes. The most common scam is when the ‘lender’ requests you to pay an upfront fee (despite not having physical storefront offices) that guarantees your loan being approved. This act is against the law. No one can charge such advance fees.
Some want to capture your personal financial information to attempt identity theft. When applying for no credit check loans, there’s absolutely no reason for the lender to ask you any personal information. Lastly, if the terms have you pay directly to an individual, then the chances are that you’re being scammed. I’m not saying you can’t get trustworthy no credit check loans, but you must keep a cautious eye open.
- Read the fine print: If the loan is arranged by professional, honest lenders, you won’t spot inconsistencies. On the contrary, the moment you start spotting things that don’t make sense, it’s best if you steer clear.
- Never trust mail offers: Alright, not all can be bad. But I can say with some degree of certainty that 9 out of 10 are scams. You shouldn’t provide any information until you verify that they’re a legitimate business.
- Don’t settle for unreasonable terms: Not a scam but just common sense. Perhaps the business is legitimate, but the terms might be rigged to make you fail since the start. Just walk away!
Talk with honest businessmen. The best thing you can do is to avoid shady loaners. You’d be surprised to know that many companies offer fair no credit check loans without trying to tangle you into unpayable debts.Contact Bad Credit Loans today if you don’t have any business in mind.
Good luck. Stay out of sight of the loan sharks!