How do No Credit Check Loans Work?
You may have heard of no credit check loans and wondered how they work. These loans are fairly new onto the market and this means that not everyone has had a chance to try one out. It is good though, to know what they are all about in case you need one. This might be something you feel you will never need and will be a waste of time, but we never know when we might need to borrow money and under what circumstances, we might need it.
What are no credit check loans?
You may have not heard of no credit check loans before, in fact you may wonder whether they are even legal. You would be right if you were thinking that it was a law the lenders had to do a credit check. However, these loans are slightly different and do their credit check in a different way.
The loans have other names such as short-term loans or payday loans and so you may have heard of those. They are very simple to understand as well. They are not issued by traditional banks and high street lenders but they tend to be online loans. This means that the lenders are not so well known.
The loans are usually for £100-£1000 and you can choose how much you borrow. However, you may find that a lender will not be prepared to lend so much to a first time borrower. It might be that they will want to lend a small amount and see whether you manage to repay it on time before they lend a higher amount. This is because they will be taking on quite a risk. They will be offering the loan to anyone even if they have a poor credit record so it will be important to make sure that they can get their money back.
How do they work?
The loans work a little differently to a more traditional loan. Applying online or over the telephone is quite different to some but there are some other differences as well. The main one is probably that you will normally need to repay it all in on ego. This means that you will need to repay everything that you borrow and the interest and fees all in a lump sum. This can be fantastic for people that do not like being in debt for long because the debt will be gone really quickly. However, it is really important to make sure that you have the money available to repay it. If you miss the repayment or pay it late there will be additional costs to pay, just like any other loan and it is wise to avoid these if you can. If you are careful though you will be able to avoid these. If you borrow a reasonable amount, check how much you can afford to repay and are very careful with your money, you should be able to do it. Just make sure that you plan it all out beforehand so that you are confident that it is something that you can afford and you have a written plan if you need to change your spending habits in order to cope.
The day that you have to repay the loan is on your payday. This should enable you to manage it more easily as you will have money coming in on that day. The lender will set up a direct debit so that you will not even forget to pay. You will need to make sure that you will still have enough money available though. It is easy to assume that you will have enough money because you have been paid. However, you need to be really careful because you will have other direct debits coming out perhaps or other things to be paid. You may even have an overdraft that will get paid on that day too. Therefore, you need to make sure that you will have enough money there to pay the loan.
There are lots of different lenders that will offer this type of loan as well. This means that you will have plenty to choose form. It is a good idea to compare them as well as they will differ. They will be different on things like price and customer service. You may want to go with the cheapest but it is worth thinking about whether there are any more factors that might be important such as how easy it will be to repay, what the lender is like and so on. There are some differences between the lenders with regards to the way that the loan works. It is good to do comparisons for this reason as well. The differences might not be huge but they could be the difference between whether you decide to pick that lender or another and this could determine whether you have a positive or negative borrowing experience.