Think fast. Your roof starts leaking right after your car breaks down. You’ve got enough cash on hand to fix one but not both.
What do you do?
In 2022, CBC reported that Canadians were increasingly dipping into their savings to make ends meet. With this spending dynamic going on in the background, however, lenders have been dragging their feet when it comes to taking on borrowers with less-than-ideal credit.
Here’s the good news:
Canadians don’t have to beg traditional lenders for short-term loans. They can take out no credit check loans instead.
Like the name says on the tin, a no credit check loan is a loan option that allows you to sidestep the whole credit check thing by asking the question, “Can you afford to repay the loan?”. Although getting a loan with no credit check might sound like a dream come true for cash-strapped Canadians, this strategy does come with its own set of risks.
Keep reading to learn more about some of the common risks associated with taking out a no credit check loan.
1. High Interest Rates
For most borrowers, the principal amount isn’t the cause of those end-of-month “I can’t believe I’m paying this much!” moments. When you’re trying to figure out the cost of a loan, the interest rate is what you have to look out for.
Online loans with no credit check required are amazing in that you can easily get your foot in the door with them. But depending on who you borrow from, that ease of access can come at a substantially higher cost.
Here’s what we mean:
Let’s say that you’re borrowing $300 to cover an emergency expense. With a 10-percent interest rate, you’re looking at an additional cost of $30 on your end. Not bad, right?
However, for many lenders who offer loans with no credit check, that interest rate may be closer to 20 or 30 percent. Suddenly, instead of eating at home instead of having a nice one-time dinner, you’re spending the equivalent of an insurance payment on your debt. And when you get right down to it, those sky-high interest rates can demolish your disposable income if you’re not careful.
2. Data Breaches
A few years ago, the idea of companies misplacing customer data was unthinkable. Fast forward to 2021, however, and data breaches were costing businesses roughly $6.75 million per incident. Once you’ve factored in the growing concerns associated with hackers, identity thieves, and the dark web, it’s clear that cybersecurity isn’t just a way to avoid embarrassment — it’s an essential part of keeping your personal information away from bad actors.
When you apply for a loan with no credit check, you’re trusting your lender with a lot of personal information. In your application alone, you’ll be providing your full name, your date of birth, and your banking information. That’s a treasure trove of data.
Here in Canada, the Big Five have had years to cultivate a stellar reputation when it comes to keeping people’s finances off of the dark web. Many lenders that offer loans with no credit check just haven’t had the same opportunity to prove their trustworthiness when it comes to customer privacy.
3. Unfavorable Terms
Have you ever seen a movie or read a book where the main character makes a deal with someone who’s obviously bad news?
When your back is against the wall and you’re in desperate need of fast cash, it can be tempting to go with the first lender that says, “We offer online loans with no credit check required.”. However, even if the no-credit-check part is true, those lofty promises can come with strings attached.
Maybe you’re getting the loan, but the amount is going to be significantly less than what you need. Or perhaps you get the money and you get approved for the right amount, but the repayment period is so short that you could find yourself struggling to make your payments.
We’re not trying to brag, but the borrower-friendly rules we use with our no credit check loans are one way that we’re able to differentiate ourselves. We have a minimum repayment period of three months or longer and we allow our borrowers to extend their loans.
But not all no credit check lenders are willing to do that. As a result, vetting your future lender is the only thing you can do in these circumstances. You want to look for transparency and reasonable terms that make you say, “Oh yeah. I can definitely handle that!”.
4. Getting Scammed
It’s no secret that online scams are on the rise. And simply because people in need of a no credit check loan are likely to be short on time, it’s all too easy for predatory individuals and fake lenders to make a lot of money at the expense of trusting borrowers.
Some of the forms lending scams can take include:
- Asking for huge upfront fees
- Guaranteed approvals
- Processes that involve prepaid cards
- Phishing scams that take your personal information
Being able to borrow money without having to do a credit check can feel like being handed a financial lifejacket. This is especially true for borrowers who haven’t always had a spotless credit history. However, when it comes to your financial information, it’s better to be safe than sorry.
Here’s the Truth About No Credit Check Loans
One of the first things you’ll notice about no credit check loans is that the risks are essentially the same as they would be for any other type of online loan. If you choose to go this route, however, you can’t go with just any lender.
As a company, we understand that bad financial situations can happen to anyone. Our no credit check loans are designed to help Canadians get the money they need in a pinch.