If you have a low credit score or less time for application, you could try a payday loan.
The modern world is definitely fueled by money, and those with it have the advantage of more opportunities, better housing, and less stress in some cases. Because of the increased demand for money borrowing, there are a lot more types of loans than ever before. For this reason, it can be a little overwhelming at first glance to know which type is best for you and what your options are. This guide covers different types of loans that are most frequently applied for, as well as what they might be used for.
No Credit Check Loans
Credit checks can allow you to access more loan options and more flexible repayment options. However, they generally take time and need some of your personal details in order to apply for and carry out a credit check. If you need money straight away or if your credit score is a little low, then you might want to apply for a loan without a credit check. You can even repay these types of loans ahead of time as it can help you build a credit score. Check out CreditNinja's loans without a credit check.
Payday Loans
You can ask your employer for an advance on your paycheck, or apply for a payday loan. These work similarly to post-dated checks, because of the principle that you will repay the amount borrowed when you are paid. If you need money for something urgent or find yourself short of cash several weeks before payday, then you can apply for this type of loan. The emphasis of these loans is that they are short-term solutions, and have relatively high interest rates because of this. If you can afford to lose certain amounts of money from your paycheck, then you can easily consider setting up automatic payments within the predetermined time frame.
Pros
Easy to repay
Almost instant access to cash
One of the easiest loans to apply for
No credit check needed
Cons
Not the best long-term solution, especially if you are someone who struggles to repay debts or loans on time
Personal Installment Loans
These work similarly to payday loans, in that they offer you a smaller amount of money borrowed than some other options. These also require you to repay the money lenders within an agreed period of time, and can have pretty high costs if you are unable to repay them. A common drawback of personal installment loans is that they have high interest rates, which means that they are intended to offer short-term financial solutions rather than more substantial ones. That said, personal installment loans are recognized as a superior option to payday loans because the maximum amount of money borrowed is higher.
Pros
Higher amount achievable compared to payday loans
More flexible repayment options than payday loans
A good financial solution for emergencies
No credit check required, which means that the application is a lot faster than some other loans
Cons
The interest rates are still pretty high compared to other loans
Lower amounts can be borrowed than other types of loans
Secured Loans
Another option for those without the best credit score, or even if you don’t have the time to get a credit check, is a secured loan. These work by using your assets as collateral, which allows you to borrow more money from lenders. If you own your home, then this can be a great way to borrow money, as it works similarly to a security deposit. The value of your possessions, or more commonly house, is assessed and used to ensure that you repay the lenders.
Pros
Higher amounts can be borrowed
Different types of secured loans are based on what item you are willing to price; such as vehicle or mortgage
Cons
You risk losing your home or possessions if you don’t repay the loan on time with the right amount of interest
Debt Consolidation Loans
Another loan option for those who want to work towards their credit score is a debt consolidation loan. These have been designed specifically for someone who has a lot of debts with different accounts. Applying for a debt consolidation loan can help you repay your existing debt and close those accounts if you choose. Then, you can focus on repaying only one money lender.
Pros
Depending on the type of accounts that you have open, these loans can help you to build a credit profile by paying debts on time. However, you should also be mindful of how closing accounts can have a toll on your credit score, because it makes your profile look less varied
Cons
Only a temporary option for those with a lot of debts, that shouldn’t be heavily relied on for other items. There is no guarantee that you won’t go into debt again, so you should begin working on your financial situation in the long run
Some debt consolidation loans have upfront costs
The interest rates are often significantly higher than other options
Why are Credit Checks Important?
Credit checks can open a lot more doors for you financially, and checking your score can show you what your baseline is and encourage you to create long term changes that will improve your credit. When you have a good credit score, there are more money borrowing options available to you. This is because banks and money lending institutions see you as less of a risk, and recognize your credit score as a sign that you will repay the full amount over time. This means that you are likely to have more options and flexibility for repayments, which can be beneficial when it comes to long-term planning. When negotiating mortgage deals, or finance plans with a vehicle, people with good credit scores can have lower interest rates and more flexible repayment periods.
Summary
While it can help with your future planning to get a credit check and work towards improved credit scores, there are a number of loan types that provide access to instant cash for you to choose from. Because of the increased demand for loans with no credit history or a low score, there are a range of options that vary depending on what you need the money for. The application process is significantly faster and as long as you can repay the amount borrowed, it can provide you with the comfort that you need during urgent situations.
