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Why No Credit Check Loans Make People Worse Off: Do Loans for People with Bad Credit Worsen Financial Difficulties?

No credit check loans tend to be the only lending option for tenants with financial difficulties, especially if combined with adverse credit. They are regularly referred to as instant loans because they are generally made available to borrowers within 24 hours.

The popularity of no credit check loans and Payday loans has grown exponentially. This is because loans for people with bad credit are extremely hard to find in the current economic climate. There are many restrictions placed on personal borrowing for people with excellent credit, let alone bad credit.

Does the Cost of No Credit Check Loans Exacerbate Existing Financial Difficulties?

No credit check loans are often seen as a way of surviving until getting paid, hence the reason they are regularly referred to as Payday loans. Loans for people with bad credit attract a usury rate of APR of in excess of 1000% because the borrower has bad credit and represents a higher lending risk.

Paying a huge amount of interest on a no credit check loan with next month’s salary can only serve to exacerbate financial difficulties the month after. A no credit check loan isn’t a cheap loan and the high APR virtually doubles the debt in a single month. They are virtually useless for debt consolidation due to the high APR.

No Credit Check Loans and Frivolous Purchases

Whilst no credit check loans are often advertised as being useful for paying the rent or covering emergency bills, many are used to pay for luxury items and holidays. If someone is experiencing financial difficulties, is taking out a no credit check loan at a high APR really a wise move?

Chris Tapp of the Donal MacIntyre programme stated that, “We would only ever want to see people using payday loans if they have a desperate, one off short-term need and there is absolutely no other option.” It is always sensible to see if it is possible to get a loan from friends or family before signing up to a no credit check loan.

Defaults on Loans for People with Bad Credit. Are They More Likely to Lead to Creditor Harassment?

Lenders recognise that they are offering no credit check loans to people with bad credit and that loan default rates are higher. This is one of the reasons for the high APR. Bad credit lenders are far quicker at selling on accounts to debt collection agencies. Many debt collection agencies use very aggressive tactics to recover money, often bordering on creditor harassment.

A no credit check loan should only be considered as a way of borrowing money in the event of an absolute emergency. Avoid the allurement of shopping and holidays as an emergency means just that — rent, mortgage, food or utility bills.

Is Credit Card Debt Consolidation is an Option?: Student Loans, Home Mortgages & Auto Refinancing

Many people never expect to have to consider credit debt consolidation as an option to staying afloat. The bad economy and high unemployment rates have caused many financially competent people to have to consider consolidating two or more major loans before they turn into bad debts.

Is Debt Consolidation Practical?

Debt consolidation, whether it is to combine home mortgages, car loans, student loans or credit cards may be the best option for some people. Every situation is different. If credit payments are causing stress and feelings of being overwhelmed consider the following questions:

  • Is it a struggle to pay minimum payments on time?
  • Do flexible interest rates continually rise?
  • Are debts on the mind while in bed?

If the answer was yes, a credit and debt consolidation program may be an option.

Is Consolidation Available for Secured Debt?

Secured debt, such as home mortgage loans, car loans and other debt that has collateral, will go through a different consolidation process than unsecured loans. Unsecured loans are credit cards, personal signature loans and any other credit debt that does not have some type of property tied to the debt.

Consolidation for Unsecured Debt?

Credit cards are the most common unsecured debt that is consolidated. The companies charge very high interest rates. People who can only make the minimum payment will pay on these cards forever without paying down any of the principal. One way to get out of the credit card debt when it spirals out of control is to consolidate. Debt consolidation turns many payments into one payment each month. This instantly lowers the household stress level.

Additionally, thousands of dollars can be saved because they are turned into one low-interest monthly payment. Getting out from under the much higher credit card interest rates and exchanging it for a low-interest rate saves money in itself.

There’s more, a debt consolidation firm can help negotiate some of the credit card balance be removed from the card. This will lower the amount that will be refinanced.

After Credit Debt Consolidation

After the consolidation process begins, the creditors will require the customer to stop using their credit cards. The accounts will be closed.

Improved credit scores will be achieved when consistent payments are made over a period of time. Though the credit score will drop initially, it will eventually increase again because the spiral down cycle of not making payments will have stopped. In its place is a responsible person who is timely with the payments and meets financial obligations.

Credit cards, student loans, home mortgages, and other loans can undergo consolidation in different ways. Unsecured debt can be reduced drastically just by making a few telephone calls and making that first step to reducing stress and financial strain.

Utilize the Convenience Checks from Credit Card Companies for Debt

When it comes to debt consolidation loans, there are several ways to get low interest rate money. One of those ways to consolidate debt through a family loan, another way is to seek a personal loan from a credit union which usually have lower interest rates then credit cards. However one often over-looked source for debt consolidation loans is to use a credit card.

Use Convenience Checks Provided by Credit Card Companies

Many credit card companies periodically offer their customers something called “convenience checks.” These credit card checks usually offer a period of low interest on the money that the credit card holder wishes to borrow. That low interest rate usually lasts from a period of 6 to 18 months. After which, the borrowed money then reverts to the current APR on the credit account.

Plan Debt Consolidation Wisely

The credit card companies are counting on the fact that consumers are going to bite off more than they can chew. It might sounds nice to consolidate $10,000 worth of debt from 19 percent down to 3.9 percent, however, once that term is up, the APR might zoom right back to where it was or even higher.

Determine a reasonable monthly payment that can be made against the amount the convenience check was cashed for in the first place. For instance if a $3600 check was written that has a low interest rate for 18 months, make sure it is feasible that the entire $3600 will be paid off in that time frame. In this example that works out to $200 per month plus the associated interest. If the debt isn’t cured by that time it may defeat the purpose of getting the debt consolidation loan in the first place.

Factor in Balance Transfer Fees

Balance transfer fees used to only be associated with transferring a balance from one credit card to another. Now credit card companies have begun attaching them to convenience checks as well. Balance transfer fees tend to have a few of 3 or 4 percent with no maximum associated. That means on the example of a $3600 loan, one must factor in paying an additional $144 for that loan. (If the balance transfer fee was 4 percent.)

Use Convenience Checks for Fast Cash Advances

Convenience Checks are most effective when someone needs cash in a hurry and also plans to pay off the loan before the promotional period expires. Getting a loan that carries an interest rate of just a few points for 18 months is one of the cheapest ways to get money. Just be sure that the balance is paid off in that time frame to stay ahead of the credit card companies.

Give Yourself Some Credit

Over the past two months I have talked about my experiences with raising children as a single dad. People ask me all the time “how do you do it”, to which I respond “I just do it”. Really when you think about it, we all have some sort of experiences from our childhood that we can draw upon. Some of those memories are positive and some of those memories are negative. Too often I talk to frustrated parents who say “My parents raised me to be what I am today, why can’t I do the same with my kids”. Or “My kids just don’t understand how good they have it”. Allow me to break the news to you folks, life wasn’t always a bundle of roses for you growing up, and I guarantee you that it wasn’t for your parents either. Kids are kids, God bless them. They are here to challenge us, test us, negotiate with us and generally push every button that they can. If you are going to try and compare how you were raised, with raising kids today, you need to wake up and smell reality. When I was playing high school football we had three plays. Run left, run right and run up the middle. It was a pretty simple game plan. Now days the parenting game plan, just like football game plans, have become more complicated. Whether you are single parent like me, or part of a two parent household, give yourself some credit. Your kids will be just fine. As long as you listen to them, talk to them, are honest with them, and most of all, let them know each and every day that you love them, things will work out.

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