Should I get a no credit check or other online loan?

Ralph Estep Jr.:
00:00

What do you do when money is tight? Those bills are piling up. Your bank account is nearly empty. What do you do? What do you turn to? Well, turning to quick online loans may seem like the only option. But, are no credit check loans and payday loans really smart financial moves? Or are they debt traps in hiding? Are online loans like no credit check loans or payday loans ever a good idea? Let's dive into the pros, the cons, and alternatives today. Let's find out today on the Ask Ralph Show!

Ralph Estep Jr.:
00:31

Welcome back, finance friends, to another episode of Ask Ralph, the show where we master our finances from a Christian perspective. I'm your host, Ralph, and I'm thrilled you chose to spend a part of your day with me. I am truly honored to be able to provide you Christian guidance on your finances. Yesterday, we talked all about home warranties. We talked about what they cover, what they don't cover, and whether they're worth the money. If you missed that episode, be sure to go back and listen. It was truly jam-packed with useful homeowner tips.

Ralph Estep Jr.:
01:00

Now, today we're tackling a big one. That's online loans with no credit check, payday loans, installment loans, lines of credit by many names, but they will promise that quick cash without having to go through a credit check. It sounds too good to be true. And it just might be. By the end of the conversation, you'll know the pros, you'll know the cons, and I'm going to give you some alternatives when it comes to no credit check loans and making those online decisions.

Ralph Estep Jr.:
01:28

So, let's take a minute to reflect on a critical verse from the Bible about debt and borrowing. Proverbs 22:26-27 warn us to not be one who shakes hands in pledge or puts up security for debts. If you lack the means to pay, your very bed will be snatched from under you. Ouch, that one cuts sharp. This verse reminds us that if we continually borrow without the ability to repay, we eventually may lose our most basic necessities. Loans should be entered into carefully and repaid diligently whenever possible.

Ralph Estep Jr.:
02:03

Otherwise, the truth is we risk facing serious consequences down the road. As you consider quick online loans or other borrowing options, heed these wise words and make prayerful, prudent financial decisions. All right, well, let's dive into today's topic: no credit check loans. Here's what we're going to cover.

Ralph Estep Jr.:
02:22

We're going to talk about what no credit check loans are and how they work. We're going to talk about when these loans may be helpful and, more importantly, when they're harmful. We're going to talk about the pros and cons of no credit check loans and what some alternatives are if you need fast cash. And finally, I'm gonna give you my tips for avoiding traps and using loans wisely. Sounds good? Well, let's get this money conversation started.

Ralph Estep Jr.:
02:44

Let's start by asking the first question: what are no credit check loans? No credit check loans go by many names. You may have heard them called payday loans, cash advances, installment loans, lines of credit, but they all basically work the same way. Here's how it works. You need money quickly, but you don't have good enough credit to get a traditional loan from a bank. So, you turn to an online lender who promises fast cash without running your credit.

Ralph Estep Jr.:
03:08

You go online, you see these things all the time, you fill out a brief, short application with some basic personal and employment details. Often, lenders will request access to your bank account. They say they want to verify your account. But we'll talk about why they do that in a second. If you're approved, you get that cash directly deposited into your account within a day or two.

Ralph Estep Jr.:
03:27

When your next payday comes around, the lender automatically grabs that money back from your account where they collect their payment, their fees, and a ton of interest. With some loans, they'll even give you the option to make payments over several months. Now, of course, the major appeal is the speed and ease of getting approved without a credit check. But as we'll see shortly, these no credit check loans come with some huge risks.

Ralph Estep Jr.:
03:50

So, you might ask, “Ralph, when are no credit check loans helpful?” I'm not a big fan of these, but here's the deal. No credit check loans can be helpful when you have an urgent need for cash. Here are some examples of that. Let's say your car broke down and you need to get it repaired because you need it to get to work, but you don't have any savings.

Ralph Estep Jr.:
04:08

You didn't listen to Ralph about that emergency fund, and you have to cover those costs upfront. Maybe you ended up with a high medical bill not covered by your insurance company. So, like we've all been there, you need to pay it quickly before it goes into collections and damages your credit. We'll discuss that topic in a future episode because there have been some recent changes to whether these medical collections are even able to be reported on your credit, so stay tuned.

Ralph Estep Jr.:
04:31

Maybe your work hours got cut unexpectedly. You need some extra cash to pay bills and buy groceries. You have to put food on the table until your hours increase again. In situations like these, quick access to cash can be a lifesaver. And if used carefully, and I use the word carefully, a no credit check loan can help you bridge a temporary cash crunch. Notice I said temporary bridge. But the key is realizing these loans simply buy you time. You must have a plan to repay them quickly and avoid rolling them over.

Ralph Estep Jr.:
05:03

And the truth is the lenders want you to roll them over. Otherwise, things get dangerous fast. So, “Ralph, when are no credit check loans harmful?” We're going to start by saying most of the time, far too often, no credit check loans create a debt spiral that can bury borrowers in fees. Here are some warning signs to look for. These loans do more harm than good if you find that you're in these positions.

Ralph Estep Jr.:
05:25

You use them for non-essential expenses, maybe a shopping trip, a weekend getaway, new tech gadgets. Taking high-interest loans for wants rather than true needs is a recipe for trouble. Maybe you continually roll over or reborrow the loan. This creates a cycle of debt with exorbitant fees that keep you trapped. Unfortunately, I've seen people get really stuck in this kind of trap. They get that loan in week one, they're short on money again, so the lender says, "Oh, we'll just roll that into a new loan and add a bunch of fees."

Ralph Estep Jr.:
05:56

Here's a real big one: you borrow from one lender to pay off another. This is a huge red flag, and it certainly tells me you're in over your head. If making the payments leaves you unable to cover other medical bills or other bills or basic needs, my guideline is this: only use a no credit check loan if you can repay it without borrowing again, and if defaulting won't crush you financially. Otherwise, you have to find another option.

Ralph Estep Jr.:
06:24

So, what are the pros of no credit check loans? There are some pros when used responsibly. The biggest pros of no credit check loans are the speed. You can get approved in minutes, truly minutes, and you'll have these funds directly deposited into your account generally within 24 hours. This can be critical in an emergency with a car repair or if you're short on hours. Another big pro is low qualifications. Approval is based mainly on having a steady job and a bank account. Your credit score and your credit history really don't matter.

Ralph Estep Jr.:
06:57

Another pro is convenient access. The application process is quick, and generally, everything is done online, and those funds hit your account directly. Again, these benefits only apply if you use a no credit check loan as a short-term patch during a crisis. In those cases, they can be helpful, but we have to weigh the pros against the cons.

Ralph Estep Jr.:
07:19

So, “Ralph, what are the cons of a no credit check loan?” Look, I want you to listen to this. The biggest downsides of these loans are, number one, sky-high interest rates, typically starting at 200% or more. Yes, you heard me right, 200% or more. Even a small loan can mean hundreds of dollars in fees. Another con is, I really believe this, it's predatory lending practices. Some lenders will deliberately trap you in a cycle of reborrowing and reborrowing just to continue to pay their fees.

Ralph Estep Jr.:
07:53

Another con is these automatic withdrawals from your accounts. This convenient feature can lead to overdraft fees if you're short on cash when payments are due. Hey, if you're struggling financially and you have a cash crunch, the truth is your bank account is not going to be flowing with honey. Another con is it hurts your credit. If you can't repay and default, it damages your credit history and the debt may get sent to collections. They might not be pulling your credit to get the loan, but I can assure you they're going to report if you don't pay it.

Ralph Estep Jr.:
08:20

Here's another con, and this one is huge: sinking deeper into debt. It's very easy to fall behind on other bills while scrambling to make loan payments. Essentially, while no credit check loans provide quick cash, the costs are incredibly high, both financially and personally, if you can't repay promptly. And the truth is, they're emotionally draining. So let's talk about some better alternatives.

Ralph Estep Jr.:
08:44

So, “Ralph,” you might ask, “what are some alternatives to high-interest online loans?” If you need money quickly, here are some options to consider before taking one of those online loans. One of the things you could do is ask your employer for an advance. Some companies will give employees an advance on their paycheck in a financial emergency.

Ralph Estep Jr.:
09:02

The funds come directly out of your future pay, there's no interest or credit check required. Another thing you could do is maybe you could borrow from friends or family. This can be interest-free if you want it to be. Create a simple loan agreement to make terms clear; maybe you offer to do work in exchange for getting paid. And here's the deal with this approach: just make sure everyone's on the same page from the start. Unfortunately, I've seen these situations get really ugly when things are not hammered out in specifics upfront.

Ralph Estep Jr.:
09:29

You also can use a credit card. Now, I'm going to tell you that's ideally for small borrowing needs under $500. But you have to compare interest rates across your different cards and choose the lowest. Another option could be to take a 401(k) or pension loan. You could borrow from your own retirement savings and repay over five years. The cool thing about that is that the interest goes back into your account. There are strict rules, so you have to do your research.

Ralph Estep Jr.:
09:52

And finally, you might choose, and this is a tough one, to pawn or sell your stuff. Another thing you could do is talk to your lenders; some of them have hardship programs where you can skip payments without a penalty. But again, you have to read the fine print. The point is this: look at all your options before turning to those online predatory loans. Their convenience comes at a very steep price.

Ralph Estep Jr.:
10:14

So here are my tips for avoiding debt traps. Overall, I want to leave you with a few quick tips for using loans wisely and steering clear of debt spirals. Number one is to build savings; even $5, $10, $15 per week adds up over time. The savings prevent you from needing loans for emergencies in the first place. Yes, Ralph is again talking about those emergency funds, but they are critically vital to your survival. Another thing you want to do is pay down high-interest debts first; get credit card balances paid off to free up your cash flow.

Ralph Estep Jr.:
10:47

Another thing I stress all the time is to track your expenses. You have to know where every dollar goes so you can cut back as needed. And here's a real big one: avoid unnecessary borrowing. Be very cautious about using loans for vacations, entertainment, or luxury purchases. Here's one a lot of people don't do, and that's read contracts carefully. Don't just electronically sign anything you don't fully understand. And I talked about this a few weeks ago, and that is you may need to seek financial counseling.

Ralph Estep Jr.:
11:17

They can help create a personalized repayment or debt management plan. Just did an episode like I said, a week or two ago. So I encourage you to go check it out. And most importantly, it's a Christian finance show. Pray over all your financial decisions. Ask God for wisdom. Ask God for discernment. The truth is, with His guidance, you can avoid the traps and stay firm financially.

Ralph Estep Jr.:
11:40

Well, that wraps up my overview of no credit check loans, the pros, the cons, the good, the bad, the ugly, whatever you want to call it. The truth is, folks, quick access to cash is appealing, but you have to prayerfully consider both short and long-term consequences before moving forward. Don't forget to join me tomorrow as we discuss how to avoid illegal or shady side hustles that can cost you big time. You don't want to miss that eye-opening episode. You're going to be amazed at how these can cause you problems you weren't expecting.

Ralph Estep Jr.:
12:10

And here's my ask for today. If you found today's show helpful, please subscribe, leave a review, and share it with a friend you think may benefit. The truth is, folks, when we work together to expand knowledge, we can change lives. Also, be sure to check out our website, askralphpodcast.com. You can access the show notes there, plus tons of other useful financial resources.

Ralph Estep Jr.:
12:31

And here's what I want you to do when you join our email list: you get a free copy of my book, "Mastering Your Finances." In this book, 47 pages of actionable money tips to help you improve your finances. Don't become enslaved to debt. Seek wise counsel and choose alternatives that set you up for success. And as I always say, stay financially savvy, my friends, and God bless you today.