When you have a bad credit score and you want to borrow money, unfortunately you do not have various options to get the loan. You chase a deal that allows you to have funds into your account as quickly as possible due to emergency. When you take out a loan, lenders will look at your credit history to determine whether you will be able to pay it off or not.
A good credit history helps you get the loan at lower rate of interest. However, there is no guarantee that you will always get the best deal. It all depends on the policy of a lender. Even if you have a less-than-perfect credit history, lenders will run a soft credit check and may turn down your application if your credit score is not up to the mark. In the end, you are left with ‘no credit check loans in UK’ only.
Know What the Loans Are All About
Loans with no credit check require neither hard credit check nor soft credit check. It means you will get the loan based on your affordability only. The lender will not consider your past repayment history.
These loans are the best to take out during emergency because you can get funds more quickly than those require soft credit check. However, these loans also carry unattractive interest rates. Make sure that you will pay off these loans on time.
A few lenders provide these loans for a span of three to 12 months that enable you to repay your loan in monthly instalments, much more manageable than other loans paid in lump sum.
If you have been given the chance to repay the debt in instalment, choose no-credit check instalment loans. Before you reach any conclusion, look at benefits and drawbacks of these loans.
Lower interest rates
No credit check loans are sanctioned immediately without considering your credit record, hence they are subject to high interest rates.
They may be onerous to bear if you are obliged to pay back in one go. On the contrary, no credit check instalment loans come with lower interest rates as you pay off the whole debt in monthly instalments.
However, you still find these loans expensive because you will end up with paying more total cost than you expected. Most of the borrowers avoid taking out instalment loans, though they carry one-third of the APR that payday loans charge, because of the higher total cost ignoring other aspects.
Short-term loans allow you to pay off the whole debt in lump sum and therefore, you fail to meet the obligation. As a result, you end up with being submerged under debt. However, instalments enable to settle the debt without missing repayments.
Further, you take out a short-term loan like payday loans multiple times. If you add up the total cost of all those loans, you will find that you have paid three-times more than the total cost that instalment loans will set you back.
Installment loans are amortizing debts
With an amortising loan, interest accrues over time and every repayment you make goes toward the principal and the interest. Non-amortising loans, on the contrary, charge interest at flat rate and principal does not diminish unless the lump sum payment is made.
Instalment loans are generally amortising in nature, however, you must confirm your lender. Most of the bad credit lenders do not provide this facility. An amortising loan will help you pay back the loan early and save your money in interest.
You should also ask your lender if you could repay your instalments in advance. This is the best technique to save money. Make sure that your lender does not charge prepayment penalty fees.
Other short-term loans like payday and no-credit check loans are not amortising. You will have two-weeks or a month to repay the loan outright. You will be charged late payment fees and interest if you miss the repayment. It does not save you money at all, because the principal amount stands due in your account unless you make full repayment.
You should choose instalment loans because your each repayment goes toward both the principal and the interest, which means you will be able to get rid of debt early. While taking out these loans, make sure that you get the loan with amortising feature.
The bottom line
No matter whether you take out no credit check loans or no credit check instalment loans, you must be careful with your repayments. The lender disburses money based on your affordability. If you fail to pay off your debt on the due date, your credit scores will go down and you will be in a hole.
Before you finalise a lender, you should compare interest rates so that you get the best deal. Be upfront to ask about the prepayment penalty fee, hidden fess, and application fees.