3 Risks of Short-Term Loans Without Credit Checks
You may be aware of the high APRs that can go without a credit check loan, but did you also know that your lump-sum payments could end up in a cycle of debt? No credit check loan can be a good financial solution if you need money quickly. However, that doesn’t mean you just have to take out the first loan you advertise or enter the transaction without knowing the risks, especially if the loan is a short-term payday loan, a loan on title or advance.
If you are looking for a short term loan without a credit check, here are the three risks you should be aware of.
1. High APR.
A look at the interest rate on one of these loans does not tell the whole story. For example, 15% interest on a two-week payday loan doesn’t look bad, does it?
Therefore, you should check the APR. Ordinary loans calculate interest annually, while short-term loans calculate interest weekly or monthly. A rate of 15% over two weeks corresponds to an annual percentage of 391%. Yes, we were not kidding that these loans were much more expensive than standard loans or credit cards. If you have bad credit and are looking for a loan, a lower APR is a factor you should definitely consider.
2. Unaffordable payments.
It is a reality for many borrowers without a credit check. More than 80% of payday loan customers don’t have enough money in their monthly budget to cover their payments, according to a study by the Pew Research Centers, while the Financial Consumer Protection Agency found that the borrower receives 10 Payday loans on average per year. Before deciding on a payday loan or short term title, you should consider the bad credit rate options available in your area. A longer repayment period means smaller individual payments that are easier to adapt to your budget.
3. Lenders who do not check if you can pay.
Before applying for a bad credit loan, you should review your budget and make sure that you can pay your payments without having to request an additional loan. And one of the reasons why you have to do it is that many lenders without credit checks do not.
This is very different from the operation of traditional credit institutions. Ensuring that your customers can pay is the reason why banks and other personal lenders primarily check the creditworthiness of an applicant.