The advantages and disadvantages of no credit check loans

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The advantages and disadvantages of no credit check loans

No credit check loans are unsecured loans given out in low amounts for a short period. They are meant for customers with a poor credit score. The advantages and disadvantages of no credit check loans are as described below.

 

Advantages

 

Quick approval

Financial institutions who lend bad credit personal loans often handle this process quickly. The borrower does not have to present several documents before being approved for a loan. This is the reason why these loans have a higher approval rate as compared to credit check loans.

 

No possession at risk

The borrower offers nothing as collateral to the lender. The borrower therefore loses nothing if the loan is defaulted. The lender stands out to lose since they offer the loan without an approved security option.

 

Fixed interest rates

The lender always charges a fixed interest rate. As a result, the repayments are much easier to budget for. As long as the borrower has sufficient income, the chances of defaulting on the loan repayments are minimal.

 

Disadvantages

Poor loan terms

For a start, lenders often provide borrowers with poor loan terms that charge higher interest charges. The lender sets the loan rates and the borrower has to play by their terms in order to get the loan. Borrowers can eventually succumb to huge debt repayments that might be too expensive to deal with.

 

Small – sized loans

Lenders can only approve small amounts of unsecured loans. They consider larger loans too risky since no collateral is attached to the loan application. However, borrowers with a good credit rating can expect a higher loan amount, which in the contrary attract huge loan repayments.

 

Short term

No credit check loans are short-term to lessen the time the lender is vulnerable to loan defaults. The duration could be within weeks, months or a few years depending on the amount of money borrowed. The loan term is often set upon an agreement between the lender and the borrower.

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