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No credit check personal loans have high interest

[Apr 21, 2011.]

 

You've probably seen ads for personal loans that don't require a credit check. But don't fall for this gimmick. The fact is that most lenders require a credit check when you apply for a loan. If a lender doesn't review your credit score, it is probably a payday lender or other type of high-interest lender.


Getting a personal loan from a bank


Banks have gotten particularly tough with underwriting standards as the economy has struggled. Many people with decent credit and good incomes have been turned down for loans because banks have been reluctant to lend money to some applicants. One way to improve your chances of getting a bank loan is to establish a relationship with a lender by opening a checking, savings or other type of account. Being a regular customer who handles existing accounts responsibly could help your case.


Credit union loans


More people are turning to credit unions for their financial needs. While the process to get a loan may not be quite as strict as at a bank, you'll still need to have your credit checked. But with a credit union the process may be a little less informal, and if you are rejected for a loan you may be able to appeal to be reconsidered.


Payday lenders and pawn shops


If you can't get a loan from a bank or credit union, you may be thinking of turning to a payday loan shop. Payday lenders do not require a credit check but you do need a job or other source of income, such as social security. A loan is written against your next paycheck, so the money is due on payday. If you don't pay back the loan at that time, the balance gets rolled over into a new loan.


A cycle of debt


The problem with payday loans is that interest rates can soar well into the triple digits, sometimes having more than a 300 percent annual percentage rate (APR). Think long and hard before going this route to get a personal loan. Many people before you have reasoned with themselves that they would have the money to pay back small loans but ended up in a cycle of debt from which they could not break free.


Pawn shops are also high-interest loans but don't necessarily trap you in a cycle of debt the same way payday loans do. But when you borrow money you have to put some of your property up for collateral. So be aware that if you pawn a family heirloom and can't pay back the loan, the item may no longer be a part of your family history.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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