Why Is A No Credit Check Loan So Expensive?

When you need a loan and have bad credit, a no credit check loan might seem like the perfect solution.  It is, until you realize how much you have to pay for them!  There are a lot of different reasons that lenders charge that much money for them, and in this hub I hope to clear some of the myth so that you can understand what it is that you're actually paying for,

It's also important to understand that just because these loans are available doesn't meant that you don't need to repair your credit score.  Living with a poor score costs an incredible amount of money since every time you are extended credit or have a loan like this the interest is insanely higher than what people with good credit pay.  Is it fair?  Not really, but it's an unfortunate fact of life.

Use these loans sparingly, and do everything in your power to make sure that the next time you borrow money it's at the good credit score interest rates!

No credit check loans are generally used for fast cash.  The most common style is the payday loan, but title loans are also available.  Pawn shops will also offer short term, no credit check loans, but these are pretty dumb to use (no offense).

For the rest of this Hub we'll focus on payday and title loans.  Each are unique and have their own charges.  Skip down to whatever type of loan you need, and if you aren't sure which you need check out this Hub on the different types of no credit check loans.

With payday loans, the important thing to keep in mind is that their price is a minor reason why people struggle to repay them.  Their time is what screws most people up since their next paycheck is virtually spent before they even get their hands on it!  If you're worried about their price, first make sure that you're going to be able to pay any part of the loan back next paycheck first!

The average payday loan is going to cost you around $25 for each $100 that you borrow.  Some states have regulations and caps on how much they can charge, so this number may be much lower in your area,

With these loans you're paying for speed, the lack of the credit check, and other people's delinquency.  Speed and the lack of a credit check are obvious, but most people don't realize that a huge reason why you pay so much for these is because it costs the lender so much money to track down the people who don't pay the loans back!  This is an inherited risk on the lender's behalf since they take no measures to see what the borrower's financial history is like, and that extra price is picked up by everyone who borrows from them.

Title loans are so expensive because the lenders are jerks!  Sure, you're paying for speed, convenience, and the lack of a credit check, but they will repossess and sell the car of whoever doesn't pay their loan back to get their money back.  

Your average title loan will be around 30% interest, which is an incredible amount of money.  Then when you consider that you're going to be making biweekly payments on this loan over the next few months you realize that you're going to be paying close to twice as much as the amount you originally borrowed.

A few tips to save some money with these loans.  First, make sure that there is no prepayment penalty.  Your biweekly payment is going to be fairly low, so there's a good chance that you'll be able to pay more.  Do so, and do so without penalty to save a ton in interest.

Also, if the lender offers "interest only" payments for the first few months to reduce the monthly payments, decline.  You're going to end up paying more over the long term.  The worst part is that after four or five months of paying the interest off, you're still stuck with paying off the entirety of the loan!

That's something that you're going to have to think long and hard about yourself.  Your personal situation will determine whether or not a no credit check loan makes sense.  Screwing around and not paying these loans back is going to put you into debt for a very long time, so please use them with the utmost care and responsibility!

I hope that I've cleared up for you why you pay so much for these loans and offered a few tips on how to stay safe with them.  I know that it's not fair, but it's a reality that those of us with bad credit have to face!