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Beware of No Credit Check Loans

Personal Loans
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According to the Federal Trade Commission, no credit check loans are nearly always enticements for a loan that comes with advance fees. Often there is no loan, just the advance fees. While many people would like to hide their credit reports, it's a fact that the credit score and report is the main factor relied upon by most legitimate lenders to either decide to extend a loan or what rate to set.

  • Advance-fee loan scams. That's what the FTC calls offers for no credit check loans. The idea of the scam is to lure the customer to apply for a loan or credit card with the promise that the loan or card is "guaranteed" regardless of your credit history. Or that no credit check is even conducted. Most times you will be asked to pay an application, processing or other type of fee in advance. These fees can be legitimate, according to the FTC. But not when they are demanded in advanced before your loan is approved.

How to Spot a No Credit Check Loan Scam

  • No credit check or guaranteed loans. Lenders who say your past credit history doesn't matter and you deserve a credit card or loan no matter your credit standing are often scam artists, according to the FTC.
  • Request for personal information. The lender has already told you there is no credit check necessary, but still asks for your social security number of bank account information. That could mean that someone is going to either apply for a credit card or other account using your information. Or, the loan application contains hidden terms that include various fees, and the lender will use your personal information to have those fees debited from your account. If you complain, the lender will point to the hidden fees and the fact that you provided the account information.
  • Fees for loan by phone. According to the FTC, it's against the law for a lender who is trying to sell a loan over the phone to request advance fees over the phone before you can receive your loan.
  • Lender not registered in the state. All lenders and loan brokers are required by law to register in all states where they do business. You can check if the lender you are dealing with is registered through your state Attorney General's office or perhaps your state's banking or financial regulation division. Registration does not guarantee that a company is legitimate, but it is an indication that the company is following state rules.

No Credit Check Loan Exception

Payday loans are an example of a no credit check loan for many of the businesses that offer these loans. However, these can create some real financial hardship for borrowers are not able to immediately pay back the initial balance. For example: A $100 loan until next week's paycheck can be paid off with $115. Even if you are able to make the payment, that's 391 % interest.

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