August 2, 2019
Credit checks can be a big obstacle when trying to take out a payday loan. The good news is that when it comes to payday loans, no credit check options are available. The bad news is that these options are horrible due to ridiculously high interest rates and fees. Other options are available depending on your situation, such as credit builder loans or payday alternative loans. For most, though, cash advance apps that don’t check your FICO score and don’t charge interest such as Brigit are the best option.
Payday Loans: No Credit Check
A Tempting Option
When applying for payday loans, no-credit-check options can be attractive to those who aren’t in a good place with their credit score. People have difficulty finding options for loans especially if they have a FICO score below 600, which is a score many lenders consider too low. FICO scores are a common type of credit score that lenders will take into account when considering if you are a viable applicant for a loan.
Even for people with good credit, loans without a credit check can be beneficial. If you have good credit and are seeking a loan, applications can negatively affect your FICO score. When you apply for payday loans with a credit check, credit score providers (such as FICO) may think you are desperate for money. If this is the case, it’s possible that your credit score will be lowered.
Although there are some benefits of payday lenders that don’t check credit, don’t let them fool you. These payday lenders aren’t out to help you, and they charge even higher fees than regular payday lenders that do check credit.
Why You Should Stay Away
When looking for payday loans, no-credit-check options have far more drawbacks than benefits. Payday loan companies that don’t check credit often have astronomically high interest rates and excessive fees.
Lenders that do not check credit before giving out a payday loan can have annual percentage rates (APRs) up to 400%! Say you take out a 1 year loan of $3000. Payment each month would be around $1033 with a 400% APR, and in the end you’d pay over 4 times the amount of the loan.
“The interest rates on payday loans that don’t require a credit check are way too high to justify getting one.”
The interest rates on these loans are way too high to justify getting one. The problem is, many lenders and banks are more reluctant to give out loans to people with low credit, so this seems like your only option. Fortunately, there are some alternatives.
Alternatives to Payday Loans
There are a variety of online loan companies that have reasonable interest rates and fees that won’t break the bank. Another benefit of this option is that many don’t affect your FICO score if you apply, cancelling out one of the benefits of no-credit-check payday loans. The downside is that unlike payday loan companies, online loan companies offer longer term repayment periods. These periods usually range from 6 months to 5 years, so this isn’t always ideal for everyone.
Payday Alternative Loans are another good option when it comes to trying to avoid high interest rates and fees. With these loans, you can receive between $200 and $1000, and they have APRs capped at only 28%. These fees are more short-term, and loan-repayment occurs anywhere from 1 to 6 months. Unfortunately, you must be a member of a federal credit union and you can only take out 3 every 6 months.
Credit-builder Loans are designed to help people build credit, therefore naturally don’t require you to have a strong credit score. Instead, the bank or credit union offering this loan will make sure you have a sufficient, steady income. If you apply and are able to get a credit-builder loan, the money will be transferred into a savings account. Once you pay off the loan, you can access the money from your account. If you need cash quickly, though, this is not a good option.
A Great Option if You Need Quick Cash
If you’re looking to get a short-term advance to cover your expenses between paydays, Brigit is another alternative worth looking into. When you sign up for Brigit, you can be eligible for up to $250 so you can make it to your next paycheck, worry free. Additionally, unlike payday loan companies, there is actually no interest on Brigit advances, making it the most budget-friendly option.