Why signature loans with no credit checks are not a smart financial move.
When cash is tight and you get hit with an emergency expense, you might find yourself considering a signature loan with no credit check. It can be a risky move due to the high interest rates, but it can provide instant cash flow. Here’s what you should know.
The Basics
A signature loan with no credit check is essentially a payday loan. It is an unsecured loan because there’s no collateral. Despite no collateral or even a credit check, these loans are relatively easy to obtain. The big tradeoff is that signature loans come with sky-high interest rates. These loans are also doled out in smaller amounts — usually from $500 to $1,000. The timeframe for paying back signature loans with no credit checks is shorter than other types of loans.
Loan Comparison
Let’s look at signature loans with no credit checks compared to traditional personal loans:
Signature with No Check
- Interest rates can exceed 400 percent
- Loan terms are usually between a week and one one month
- No credit check, no collateral
- Loan limits are usually capped at about $1,000
Traditional Loan
- Interest rates between five and 36 percent
- Loan terms are 24 to 48 months
- Credit check and collateral
- Loan limits are capped at $100,000
Do One Thing: Avoid signature loans with no credit checks. They are way too risky and come with extremely unfavorable terms.