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.