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The Truth About No Credit Check Loans
There is a lot being said about no credit check loans and their benefits. There are many sites promoting these loans and making fabulous statements about them. There are however, some things you should know about them prior to rushing in and apply for one of them. As with any financial products there are advantages and drawbacks to be taken into account.
Thus, before applying for a no credit check loan you should understand what you can expect from them and what you will need in order to qualify for one of these loans. Basically you need to understand the loan characteristics: loan term, loan amount, interest rate, etc. and the loan requirements: income and other requirements.
Loan Characteristics Explained
These loans are small unsecured loans. This means that you can only get small amounts through them that can reach to $2000 at most. Their unsecured nature implies that the lender is taking a high risk by lending the money and thus, the interest rate charged is rather high. Moreover, these special unsecured loans carry even higher rates due to the fact that no credit checks are ran in order to get approved for them.
Thus, the risk for the lender is even higher than regular unsecured loans and thus, the interest rate charged is a lot higher too. Usually instead of expressing the rate as a percentage, lenders present it as a fixed fee every $100. For example: If they charge $10 every $100 then, the interest rate charged is as high as 120%. Sometimes, the fees can double the amount of this conservative example.
As regards to repayment, these loans do not offer long repayment programs. Instead, the majority of them are due by the borrowers next payday when he has to cancel the entire loan amount plus the fee and any other costs. However, there are some loans that let you finance the amount owed and repay it in no more than six installments.
Loan Requirements For Approval
In order to get approved for a no credit check loan there are some requirements you will need to meet. Credit requirements are of course bypassed due to the nature of these loans. However, there are still other requirements you will need to comply with so as to get approved. These requirements are mainly two: Ownership of a bank account and a suitable income for the repayment of debt.
The first requirement is necessary due to the fact that most of these lenders directly deposit the amount borrowed into a bank account and then when the payment is due, the money plus the fee is withdrawn from the same account. However, it is possible that some lenders may use other procedures that do not require a bank account.
The income requirement is mandatory; the lender needs to make sure you will be able to repay the loan and thus, you will have to show proof of a steady income good enough to face the loan repayment program without difficulties. This is proved through copies of paychecks or tax presentations if you work on your own.
Term Extension On Home Loan Refinancing
Sometimes due to bad credit or market conditions, it is not possible to get lower monthly payments on your home loan by refinancing. This is due to the fact that those with bad credit usually can not get a lower interest rate and that sometimes, market conditions push the mortgage loans interest rate up. However, you can still get lower installments by refinancing your loan with a longer repayment program.
The term extension will get you lower monthly payments because the loans capital is spread over a higher number of installments. With this method, if you could not afford your current mortgage loans monthly payments, you can obtain lower and affordable installments that you will be able to pay without having to make sacrifices.
Home Loan Repayment Programs
The home loan repayment program or schedule is the duration in time of the home loan. It determines the number of installments you will need to pay throughout the whole life of the loan. Payments can be done one a monthly basis, on a weekly basis, or biweekly too. Depending on the way payments are done and on the duration of the loan, you will obtain the resulting number of monthly payments.
For example: if a home loan has a 10 year repayment program, you will have 120 installments to repay the loan if payments are made monthly. But if payments are made biweekly, you will have 240 installments that will of course be of a lower amount than in the case of the loan payable on a monthly basis.
A mortgage loan repayment program can be as long as 30 years. However, the average mortgage loan has duration of 20 years or just a bit more. Thus, if you need to obtain lower monthly payments, it is always possible to refinance your home loan in order to extend the repayment schedule and thus, obtain a lower installment in return.
Consequences of Extending the Loan Term
The consequences of extending the loan term are varied, some of them are positive and others are negative. Thus, you will need to ponder them in order to decide whether home loan refinancing for a longer repayment program is the right option for you. Basically you will need to compare the resulting terms with your needs in order to see if the costs of refinancing are equal or lower than the benefits.
Ultimately, by refinancing for a longer repayment program, you will obtain lower and more affordable monthly payments. If you are lucky enough to refinance with a lower interest rate, you might be able to compensate the higher costs that a longer repayment schedule represents with the savings that a lower interest rate provide, or at least part of them.
This is due to the fact that when you refinance for a longer repayment program you are actually adding interests to your overall loan repayment. Since interests are based on time, a longer repayment program implies more interests and thus an overall larger debt. Even if you obtain lower monthly payments, you are actually paying more on the long run. It is just that the costs are spread over more installments.