No-credit
check loans can help you get money as quickly as possible, but they come with
certain drawbacks. Make sure that you know them before borrowing money. No
credit check means no inquiries – neither hard nor soft – will be made before
signing off on. When you need money quickly for an unexpected expense, no loan
can be better than quick loans with no credit check. These loans are faster than other small loans because a lender
will save time in checking your credit report.
Here are the pros and cons of these loans:
Pros
You do not need a good credit score
If
your credit rating is fair or good, you do not need to apply for these loans. No-credit
check loans mainly aim at borrowers with poor credit history. You are likely to
face cash shortfalls during an emergency. For instance, you may need money for
your car repair or you may need money for medical treatment. Traditional
lenders do not entertain people with impaired credit standing. Direct lenders,
on the other hand, fill this gap in the financial service sector and allow people
to borrow money despite bad credit rating.
Fast disbursal
The significant reason for providing these loans is helping those borrowers who have
been struggling to borrow money just because their credit rating is
disappointing. Online lenders believe that not all bad credit borrowers commit
defaults because of financial irresponsibility. You just have to put in the
loan application, the lender will perform an initial-stage shortlisting procedure
and then examine your income statement to decide on the disbursal limit. You
will get money within a couple of hours.
Cons
They can be expensive
One
of the biggest drawbacks of loans with no credit check is you will pay high
interest rates because the default risk is very high. You will not get the best
deal as they are exclusively available for borrowers with a good credit
history.
Each
lender follows different policy, so there is no fixed interest rate. Further,
the rate of interest depends on the size of loan you take out. It is normally
recommended that you should do enough research before jumping at any offer. By
comparing deals, you will be able to choose the one with better interest rates.
The
another reason for these loans to be exorbitant is they do not require any
guarantor and collateral. Compared to guarantor loans, the interest rates of
these loans will be higher. This is because the lender can call upon the
guarantor to pay off all dues if you commit any default.
They will not build your credit score
The
higher the credit score, the lower the interest rate will be. If you want to
get the best deal down the road, your credit score must be fair. To build your
credit, you need to show that you fulfil your financial obligations on time.
Since
no-credit-check loans are small loans and require you to pay back the whole of
the debt in a lump sum. The repayment period of these loans is not more than a
month. Even if you settle all of your dues on time, it does not prove that you fulfil
your financial commitments.
Instalment
loans and long-term loans can help you improve your credit score as you are to
pay back the money over an extended period. You should prefer taking out small
instalment loans. The repayment period may vary from three months to 12 months
depending on the size of your loan. If you continue to repay the entire money
on time, your credit score will go up provided the lender informs credit
reference agencies of your payments.
Take message home
Every
loan offer has its pros and cons, but you will choose the one that best suits
your needs. No-credit check loans can be riskier if you do not analyse your
repayment capacity. You should apply to a lender who approved bad credit loans after
making soft inquiries. These inquiries help a lender know about your repayment
potential like hard inquiries but do not leave hard footprints on your report and
therefore do not pull your credit score. Such loans charge lower interest rates
than no credit check loans. You are recommended that you should do extensive
research before grabbing any offer.
