Are Payday Loans and Loans Without Credit Checks are Equal?
Payday loans do not require any type of credit check, but they are one of the riskiest types of loans without a credit check.
Paying attention to details can be difficult in an emergency. Your adrenaline pumps, your nerves explode, and much of the information you find is just picked up. Before knowing it, you looked at the same form for 10 minutes, read the same paragraph over and over, without remembering anything.
If you don’t have emergency funds to cover unexpected expenses, this adrenaline-fueled brain fog could get you in trouble. Even if you think you know a lot about fast loans, you could easily find yourself in the hands of an abusive lender because you didn’t understand the type of loan you signed up for.
For example, you may have bad credit and need a loan that does not do a credit check. You see an ad for payday loans online and wonder if this is the type of loan without the credit that you should apply for. What is the difference between a payday loan and a loan without a credit check? Are they only two names for the same thing? Don’t worry, we will let you know.
What is a loan without a credit check?
It’s right there in the name: loans without credit check are products that do not require a credit check on your loan application. In particular, they do not require a difficult credit check when a lender requests a full copy of your credit report. Credit checks are also recorded in your credit report and can reduce your score for up to two years.
Some lenders without a credit check may still perform a so-called “soft” credit check when applying for the loan. Similar to a rigorous check, a flexible credit check returns information about your credit history. However, unlike a hard check, a soft check returns much less information and does not affect your score. Some lenders may also request proof of employment and/or copies of your bank statements to confirm that you are receiving a paycheck.
No credit check loan is a type of bad loan. These are products designed for people whose low credit scores exclude them from traditional personal loans. Bad credit loans have much higher interest rates than regular lenders, but also provide essential access to borrowers who otherwise would not have access. However, there are many loans without the credit that can be completely predatory and are used to capture borrowers in a cycle of constant debt.
What is a payday loan?
Payday loans are a type of loan without a small-dollar credit check, which means that payday lenders do not check your balance when you apply for one of your loans. These are very short loans with an average repayment period of only two weeks. The idea is that the loan will be repaid the day the borrower receives his next paycheck. Hence the name “payday loan”.
The standard procedure for a payday loan is as follows:
A customer enters a store and requests a loan. The lender then accepts a check dated with the amount borrowed plus the client’s interest or saves it for automatic payment on the loan maturity date. Then they give money to the customer and the customer goes out the door. Two weeks later, the payday lender deposits the check or withdraws the money from the client’s bank account.
Although the cost of a payday loan varies from state to state, they have an average annual percentage (APR) of almost 400%. And although these high annual payments are not that important if you pay your loan on time, many payday loan customers find it difficult to do so.
Some payday lenders even allow borrowers to reinvest their loan, which extends the maturity date to pay additional interest. In other cases, payday loan customers must pay off their loan and immediately borrow another to cover the additional costs.