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Are No Credit Check Loans Worth Taking?


“Any port in a storm” might be sound advice for sailors, but it can be devastating for consumers experiencing financial difficulties. Expensive and capable of trapping people in endless cycles of debt, no credit check loans come with some very serious strings attached. Still, there are instances in which they can seem like the only viable option. 

So, are no credit check loans worth taking?

Let’s take a look. 

What Is a No Credit Check Loan?

While the payday lender is the first type of no credit check loan that comes to mind, an entire subset of categories fall under this classification. These include pawnshops and auto title lenders in addition to the aforementioned payday lenders. 

The former two require you to put up something of value in exchange for a short-term loan. You’ll get the item back when you repay the loan — plus interest. While that might seem somewhat benign at first glance, the reality is you could lose the item you leave as collateral. You’ll also be looking at a much higher rate of interest than you’d get from a traditional lender — despite the fact you’re offering security against the loan. 

They Can Be Insanely Expensive

The annual percentage rate on a typical no credit check loan can be as high as 400 percent when calculated all the way out. There are also rather expensive fees with which the borrower must contend. Further, the terms are designed to make it all too easy to treadmill a borrower. 

Let’s say you borrow $500 from a payday lender and you write a postdated check for that amount, plus the interest on the date you’ll get paid. You’ll be set if all goes well and you can afford to pay. However, if you need to cut it in half, the lender will happily agree to accept $250 instead and apply interest charges plus late fees to the difference. 

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Given so many people are living paycheck to paycheck, though, when the next payday rolls around, you’ll still be unable to pay the loan in full, so that balance just keeps growing. And again, the interest rate is astronomical, so after a short period of time you’ll owe more than you borrowed in the first place. Now you have to take out another loan to cover that one and the beat just keeps going on. These types of bad credit loans just make things worse. 

Alternatives to No Credit Check Loans

In the simplest terms, a no credit check loan is exactly what its name implies: a loan extended to an individual without reviewing their credit history. In most cases, the people who need this type of assistance either have no credit history, or they’ve experienced difficulty managing credit that they’ve been extended in the past. Remarkably, some people who avail themselves of this type of financing are unaware other options exist.  

Before taking one, they could look into asking for a payment plan to help them shoulder an outsized expense. Personal loans from traditional banks and credit unions can often be had when people think they cannot. It’s always a good idea to check with one of these institutions first. Credit unions also offer payday alternative loans at more reasonable rates for a short term. Credit card cash advances, paycheck advances and loans against a retirement account can supplant the need for a no credit check loan as well. And, of course, there’s always the Bank of Family and/or Friends. 

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So, Are No Credit Check Loans Worth Taking?

Yes, and no. It all depends upon the type of no credit check loan we’re talking about and the terms that come along with it. It’s always a good idea to examine all of the alternatives before agreeing to accept a loan of this type.

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