Loans are something many people turn to when they are in financial difficulty, and there are some which almost everyone has to take out at some point in their lives, for example mortgages in order to be able to buy a house. Loans have the potential to either make or break your financial security, depending on how you approach them.
Loans can be ideal when they help you to pay of an unexpected expense in affordable instalments, but if you turn to them in desperation with no plan of how to make the repayments, you can quickly spiral into uncontrollable debt. Another way in which loans can have a negative impact is that with every loan you take out the provider will carry out a credit check, which will lower your credit score.However, there is a new loan in town; the no credit check loan, let’s take a look at the pros and cons.
Your credit score is an important measure of how well you handle your finances and therefore how reliable you are to lenders as an investment. Your credit score is built up from your payment history; from how you pay off loans of all kinds like credit cards, or bills for things like your utilities and your mobile phone. A low credit score can put you in a very difficult position as you will not be considered for mortgages, rental properties, or any kind of hire purchase you might need.
Taking out a loan requires a credit check, and credit checks put a dent in your credit score as it is assumed that the more checks are being carried out the more loans you’re applying for and therefore the less financially stable you are. Therefore, the advent of the no credit check loan is a welcome development as it offers some much-needed breathing space for those who are struggling to get out of the vicious cycle of debt.
There of course needs to be some kind of catch to no credit check loans, to make the risk of investing in someone with an unknown history worth it for the loan provider. This catch comes in the form of higher than usual interest rates and late fees, so if you do fail to meet a repayment you could see what you owe increasing at a worrying rate. However, as long as you have a manageable payment plan you can easily avoid these fees.
So how do you know when a no credit check loan is the right choice? Loans of any kind, especially those with higher interest rates and fees should only be used in times of emergency, not as a day to day solution to money troubles. The most fail safe way to handle impending expenses is to make sure you maximise your income, you save, and you avoid signing up for anything you can’t afford in the first place. Look for financial advice wherever possible before making any decision involving potential debt. If you do take out a loan, prioritise making your repayments above other financial demands as the consequences of not doing so can be harmful.