October 2018 - Responsive Lending
Monthly Archives: October 2018

No Credit Check Loans – Why you should avoid them!

No Credit Check Loans - What are they?

One of the most common questions we get here at Responsive is "Do you guys run a credit check? I've seen ads for no credit check loans". For starters, yes we will run an enquiry on your credit file. No, this initial enquiry doesn't affect your score, but any subsequent checks from lenders can impact it. 

So why don't some companies run checks?

What type of Loan Companies don't run credit checks?

In our experience, there are two types of loan / credit companies that provide no credit check loans. They are:

  • Rent to own companies
  • Payday / small loan providers

Rent to own companies - what do they do?

A rent to own provider will sign you up to a contract where you agree to rent the car from them for a set period. At the end of the period, there can be the option to buy the car from the provider at a set buyout price. 

These agreements are most commonly used for appliances (Radio Rentals, Make it Mine etc). However, recently we have seen quite a few of these companies offering the same service for cars. 

Rent to own companies usually still do credit checks, however we have seen them advertise no credit check loans.

Why should you avoid them?

While a rent to own contract might be a good option, there are a few things to consider.  

The biggest caveat is that you don't get ownership of the car until after you buy it out. So if you're looking to upgrade during the contract you might be out of luck.

Often these contracts can have large break fees. So in addition to not owning the car, you might have to pay large termination costs if you want to change cars.

Lastly, most of these contracts include the costs to upkeep the vehicles (registration & servicing). While this might sound great, the provider will often charge a markeup on the servicing costs. 

Honda Odyssey

Rent to Own companies can provide a viable way of getting a car without running a credit check. Just make sure you read the fine print.

When should you consider them?

If you have been rejected for a bad credit car loan due to recent finance defaults, a Rent to Own contract might be the best way for you to get back into a car. 

Payday / small loan companies

Payday loans, or Small Amount Credit Contracts, have been in the news a lot recently. The government has criticised them for predatory behaviour and excessive charges to customers. 

Payday loan providers often provide no credit check loans to reduce their costs. 

Unhappy woman

Payday Loans can be easy to apply for. But their high interest rates and short terms can be hard to manage.

Why should you avoid them?

Small loans / payday loans often attract high interest rates and short terms. Additionally, loan amounts are usually restricted to $2,000. 

Lastly, payday loans are often frowned upon by other finance companies. We quite often have car loan applications declined by lenders due to payday lender use.

When should you consider them?

Short term loans do have their place. They might be especially helpful when you have one off bills such as registration or bond expenses. However, check out our Bad Credit Personal Loans page before you apply elsewhere.

What's the alternative?

Using a bad credit loan specialist is a great alternative to rent to own or payday loan providers. Here at Responsive, we call ourselves bad credit loan specialists because we compare multiple lenders who all have different criteria to get you the best outcome. 

If you have any questions about aplpying for a loan, feel free to shoot us a message on facebook or call our office