Getting a loan used to involve putting on a suit and driving to your local bank. Now, it’s never been easier to get a loan online — with no credit check required. But how can you tell which loans are legitimate and which are too expensive?
There are legitimate online lenders that offer loans without a credit check. But no matter what, it’s a good idea to avoid online payday lenders. Online payday lenders use high fees and interest rates to trap consumers in a cycle of debt that’s difficult to break free. Luckily, there are online payday loan alternatives like 0% APR Instacash from MoneyLion that you can use to get money for an unexpected bill without a credit check.
Overview: What is an Online Payday Loan with No Credit Check?
First, let’s discuss what exactly a payday loan is before we talk about how online payday loans work. A payday loan is a loan you take out for a very short term with high fees and interest charges. Most payday lenders don’t care about your credit score or whether you have the means to pay back the loan. This makes them appealing for people with bad credit or no credit.
Though there is no universal definition of a payday loan, most share the following characteristics:
- A very high interest rate
- Expensive extra fees, such as a $50 service or lending fee
- The ability to rollover your loan by paying only fees and interest on the due date instead of the principal loan amount
Payday loans may or may not be legal in your state. Payday loans (including online payday loans) are illegal in many states under local usury laws. In other states, strict limits apply to the maximum amount of money you can take out, interest rates and how long you can have a loan out. In total, 15 states and the District of Columbia have some kind of limitation on both in-person and online payday lending.
An online payday loan with no credit check is a payday loan you can receive online regardless of your credit score. These types of online loans are appealing because you can get them quickly without waiting for an underwriter to access to your credit report. However, these loans are also usually much more expensive than many borrowers initially believe.
How Do Online Payday Loans Work?
First, you’d need to research your state’s laws and find out if payday loans are legal in your state. Then, research online payday lending services and choose one that doesn’t require credit checks. Determine how much money you need and request a loan online. Most online payday lenders have quick sign-up processes and you may only need to submit a request form to apply.
The lender will get back to you with a contract for your loan’s terms. This contract will include the amount of money you’re borrowing, your interest rate and any fees you need to pay on the loan’s due date. The contract will also include the date the loan is due and whether you have the option to roll the loan over to a new term. Read the contract and make sure you understand the full terms of your loan.
You’ll need to authorize a hold on your bank account with the lender. This is so the lender can withdraw money from your account on the loan’s due date. Most lenders take this payment automatically if you don’t make other arrangements to pay. You’ll usually need to call the lender before the loan is due if you want to request a rollover.
As soon as you authorize the hold on your account, the lender will transfer money to your account. Many lenders do this automatically as soon as you approve the hold, but it may take up to one business day to get your loan. You can use the money from your loan for almost anything. Unlike other types of loans (like student loans or auto loans), you don’t need to use your payday loan for a specific purpose. This can make payday loans appealing if you need quick cash for a bill, fine or other expense.
Why do payday loans have such a bad reputation? Most financial experts recommend that you don’t ever take a payday loan because these loans often have very high interest rates. You might pay anywhere from 300% to almost 800% in annual interest when you take a payday loan. This is on top of any flat-rate fee that your lender charges.
Let’s compare a payday loan to a traditional personal loan to explain just how costly a payday loan can be. Imagine that you need to borrow $1,000. You have a choice between two sources: a payday lender and a traditional bank.
Let’s say a bank lender tells you that you can get a $1,000 loan with a term of one year at 16% annual interest. The lender agrees to give you a loan, you sign the paperwork and you take away $1,000. From there, you pay the lender a monthly payment of $90.73. By the time your loan matures and you make the last payment, you’ve paid a total of $1,089 — $1,000 in your original principal and $89 in interest. In total, you paid $89 to borrow $1,000 for a year.
Now, let’s imagine that you take out a $1,000 from a payday lender. You visit the payday lender and learn that you can get a $1,000 loan with a two-week term at 400% annual interest. There’s also a $50 fee to borrow the money. You agree to the lender’s terms and you get $1,000. By the time your loan’s due date arrives, you owe the lender a total of about $1,203 — that’s $1,000 of the original principal, $153 in interest and $50 for the service fee. In total, you’d pay over $200 to borrow $1,000 for just two weeks.
Can you see now why payday loans are so hard to pay back? Over 50% of people who take out an online payday loan end up defaulting on what they owe. It’s easy to see why it’s best to avoid taking a payday loan at all costs.
Things to Look for in an Online Payday Loan Alternative
You don’t need to take a high-interest payday loan if you need cash fast. Here are a few things you should look for in an online payday loan alternative.
Quick Signups and Instant Deposits
Chances are that you don’t have time to schedule a trip to the bank or wait days for your loan if you need fast cash. Look for a lender that offers fast signups and instant deposits.
Low APR and Low Fees
Most lenders calculate the interest you pay on a loan using an annual percentage rate (APR). One of the reasons why payday loans can be so difficult to pay back is because they incorporate very high APRs. Compare interest rates and choose a lender that offers an affordable rate when you consider payday loan alternatives. Do the math and see exactly how much you’ll end up paying for your loan when the due date arrives. MoneyLion even offers 0% APR cash advances
Similarly, you should look for a lender that limits its fees and service charges. Like a high APR, fees and charges can also make it more difficult to pay back what you borrow.
No Impact On Your Credit Score
Before you take out a loan, make sure your lender doesn’t require a hard check on your credit. A hard check pulls your credit report and temporarily lowers your score. This can be frustrating if you’re working to build up your credit score. Look for a lender that doesn’t require any kind of credit check before you get a loan.
The Online Payday Loan Alternative: Instacash from MoneyLion
Are you looking for an easy way to get a short-term cash injection? Try Instacash from MoneyLion. Instacash is the safe, affordable and fast way to access your next paycheck a little early. Instacash advances have 0% APR — so all you need to repay is the principal you borrow. Best of all? You don’t need to have any minimum credit score to use Instacash.
Navigate to the “Finances” tab of the MoneyLion app and click on the button that says “Instacash.” From there, select the amount of money that you need. You can get up to $250 in Instacash depending on how much money you have coming in on each of your paychecks.
Use Your Cash
You’ll instantly see Instacash in your MoneyLion account once you confirm your transaction. You can use Instacash however you’d like. You might need money for an auto repair bill or a last-minute outfit for a weekend wedding — the sky’s the limit. You’ll repay what you borrowed when your next paycheck arrives — with no fees or interest charges.
Get the Money You Need Safely
Don’t let predatory payday lenders convince you to take a high-interest loan. No matter how badly you need money, it’s important to take a deep breath and remember that you have options — including Instacash from MoneyLion.
Choose Instacash and save on interest and crazy fees. Get started today by downloading the MoneyLion app from the Google Play or Apple App store.