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Quick loans for bad credit can look mighty attractive. However, products like payday loans and auto title loans can have major drawbacks, including short repayment periods and sky-high interest rates.

In fact, short-term loans can be so expensive that borrowers often end up paying exponentially more than they would if they’d financed the purchase some other way. And many loan holders end up re-borrowing, starting a vicious cycle that can quickly spin out of control.

So when you need money now, what should you watch out for — and what are some savvier alternatives to predatory loans? In this article, we’ll lay it all out.

What Are No Credit Check Loans?

No credit check loans, as their name implies, are loans that offer quick cash to borrowers without requiring a credit check. This means the lender doesn’t review your credit history or credit score when deciding whether to give you a loan. However, not requiring a credit check makes these loans risky for the lender, which is part of how they can justify high interest rates and fee schedules.

And when we say high, we mean high. It’s not hard to find payday loans with effective interest rates of about 400%, and sometimes they go much higher.

Recommended: What Is Considered a Bad Credit Score?

No Credit Check Loans: Borrower Beware

Rather than a set interest rate, payday loans will often charge $10 to $30 for every $100 borrowed. If a payday lender charges $15 for a $100 two-week loan, that’s the equivalent of a 391% APR.

Here’s how those numbers can work out when it comes to real money. If a payday lender charges $10 for every $100 borrowed, you would owe $50 in interest for a $500 loan, and the $550 would be due on your next payday. If you are unable to repay the loan in full when it’s due, you will typically get hit with a fee, and then the cycle repeats itself. After a few months of rollovers, you can end up owing more in interest than the actual loan amount.

Another word to the wise: The fine print on short-term predatory loans can include a variety of fees, including change fees, mandatory subscription charges, and early repayment fees. These fees can quickly add up. On average, borrowers end up paying $520 in fees on a two-week payday loan for $375.

It’s clear to see how these loans, though small in size, can lead to big financial problems. Even under the best of circumstances, it can be difficult to get ahead of short repayment terms and steep interest rates and fees.

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Who Offers No Credit Check Loans?

Two of the most common types of these no-credit check loans are payday loans and auto title loans.

•   Payday loans As you might have guessed, payday loans are designed to be repaid on the borrower’s next payday — generally within two to four weeks. Because payday loans do so often carry predatory interest rates and terms, some states have limited the size and interest rate of payday loans, but even small loans with lower interest rates can lead to financial trouble.

•   Auto title loans Also referred to as “title loans,” these are another common type of short-term personal loan that doesn’t require a credit check. In the case of a title loan, the borrower gives the lender the title of their car as collateral for a cash loan of up to about 50% of the value of the car. The borrower is still allowed to drive the car, but the loan principal plus interest is generally due within 30 days — again at astronomical rates. If the borrower is unable to pay the loan, they risk having their car repossessed.

Other lenders offer similar types of short-term, high-interest rate personal loans, sometimes advertising online loans with “no credit check required” or “guaranteed loan approval.”

Even if they aren’t called payday loans or title loans, borrowers would be wise to pay attention to the loan’s terms and conditions, particularly interest rates, fees, and expected repayment schedules.

Generally speaking, too-good-to-be-true financial products are often just that. Staying informed about the full implication of the loan’s terms and doing the math to work out how much you will end up paying over time can help borrowers avoid a potentially disastrous financial situation.

Recommended: Can You Get a First-Time Personal Loan With No Credit History?

Alternatives to No Credit Check Loans

As financially harmful as no check credit loans can be, there still might be instances in which borrowers need quick access to money. Fortunately, there are some alternatives worth consideration.

For starters, borrowers might turn their attention to why they need the money in the first place. Short-term loans are often taken out to repay existing debt, an approach that might result in the borrower going even further into debt to try to scramble out of the hole.

In this scenario, attempting to negotiate the existing debt with current lenders might be a better tactic. Sometimes, credit card issuers and other lenders might offer repayment options to ease the immediate financial burden. It’s a tactic that’s worth asking a creditor about.

Another option: borrowing from friends and family. While this can come with its own set of pitfalls, family loans are unlikely to create the same kind of debt spiral short-term cash loans might.

In order to keep things friendly, you’ll want to set out a formalized loan agreement with interest rates and terms, similar to what you’d expect to sign for a traditional loan from a financial institution. This avoids any confusion and helps keep the transaction as objective as possible.

Credit unions are another source of small-dollar, payday loan alternatives — and importantly, credit unions are subject to a federal interest rate cap and other limits that keep these loans from becoming exorbitantly expensive.

And although they’re generally not an ideal solution, credit cards may carry lower interest rates than short-term cash loans. Some borrowers might also be able to utilize a promotional 0% interest rate period in order to aggressively pay off debt during the promotional period without paying interest.

Another alternative is a traditional personal loan from an online lender. While these loans usually do require a credit check and specific approval requirements, some online lenders will extend loans to applicants with imperfect credit histories. Rates are typically higher. However, they likely won’t be nearly as high as payday loans. You may be able to get a better rate by applying for a secured personal loan (which requires using an asset as collateral) or including a co-applicant on the loan agreement.

The Takeaway

While no credit check loans can certainly be attractive, their high interest rates and associated fees can make them costly over time. Borrowers may not be able to repay the loans plus interest in the short repayment term required, which could lead to a debt treadmill scenario and, possibly, negative credit history consequences.

If you’re interested in exploring other personal loan options, SoFi could help. SoFi’s unsecured personal loans come with competitive, fixed interest rates and there are no fees required. Checking your rate will not affect your credit score.

Photo credit: iStock/FG Trade

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Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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First-time parents are likely to be very busy taking care of their little one, from basic needs (food, more food, and so forth) as well as raising them to be a kind contributing member of society.

It’s easy to put one’s own financial needs on the back burner or even on hold when focusing on your child. But as your family expands, it can be all the more reason to drill down on your finances and work on taking control of (and making the most of) your cash.

Raising a child costs an average of $20,000 a year, according to one recent study, which could stretch anyone’s budget to the max. To assist you in wrangling your finances, here’s a list of ways that parents can improve their finances.

1. Overspending on Baby Gear

As a first-time parent, you likely have quite a bit of work to do before the baby arrives. You may need to create and furnish a nursery for your child, and stock up on diapers, bottles, clothes, toys, and so much more.

As you’re setting up your new life with a baby, it can feel like buying everything brand-new is the only option, but that can be costly. You might consider taking advantage of used or gifted items.

You can buy a lot of items secondhand at a lower cost through online marketplaces or at brick-and-mortar used goods and consignment stores. That’s one way to save money daily.

And if you have friends, family, or neighbors that already have children, they may be looking to unload some of the gear their children no longer use. Things like cribs, playpens, toys, books, and clothes are all great for passing down.

2. Living Without a Safety Net

As a new parent, you’re about to incur all sorts of costs you may have never thought of.

Now that you have a child or one is due, having an emergency fund is even more important. You’re now responsible for all of their needs, and there may be unplanned costs that pop up along the way.

Saving for an emergency is a process, and it’s okay to start small — even just $25 a week will add up over time. Some people opt to store their emergency fund in a high-yield savings account or checking account.

3. Avoiding a Budget

Before you had children, maybe you cooked the majority of your meals at home, did all of the house cleaning weekly, prepped meals, and meticulously shopped for groceries to stay on budget.

The first few months with a newborn can be a blur, complete with sleep-deprived nights and exhaustion. You may not have as much time to cook and clean, or keep up with the other activities you were handling before the birth of your child.

You could hire a housekeeper, get take-out meals, enroll in a subscription meal-delivery service, or have your groceries delivered every week — but all of those conveniences come at an added cost, obviously.

A new monthly budget can help prepare you for the extra expenses.

As your child grows, there can be more and more new costs. Maybe they need braces or want to participate in a sport, art classes, dance lessons, or music lessons. Thinking about these costs now may make planning for them easier.

4. Putting Off Saving for Retirement

Another financial mistake some new parents make is failing to save for retirement.

Learning to pay yourself first isn’t easy for a lot of parents to do, but you could consider prioritizing retirement while helping your child as much as possible and educating the child on smart practices for student loan borrowing.

For retirement saving, one way to start is by enrolling in your company’s 401(k) plan if one is offered. Some employers will match your contribution, up to a certain percentage, and you’ll be able to have your contribution taken directly from your paycheck.

If your employer doesn’t offer a 401(k), you could open an IRA instead.

It’s never too early to start saving for retirement.

5. Not Saving for College

As mentioned, you may not want to focus solely on saving for your children’s tuition and let retirement planning fall by the wayside. But that doesn’t necessarily mean you can’t try to save for both.

While a standard savings account may seem like the easy choice, there are other options available that are designed to help you or grandparents save for a child’s education.

You might enjoy the benefits of a 529 college savings plan. There are two types: education savings plans and prepaid tuition plans.

•   With an education savings plan, an investment account is used to save for the child’s future qualified higher education expenses, like tuition, fees, room and board, computers, and textbooks. Earnings used for qualified expenses are not subject to federal income tax or, in many cases, state income tax.

•   With a prepaid tuition plan, an account holder purchases units or credits at participating colleges and universities for future tuition and fees at current prices for the beneficiary. Most of the plans have residency requirements for the saver and/or beneficiary.

A Coverdell Education Savings Account may also be worth looking into. In general, the beneficiary can receive tax-free distributions to pay for qualified education expenses.

Contributions to a Coverdell account are limited to $2,000 per year. The IRS sets no specific limits for 529s.

6. Missing Out on Tax Breaks

When you have a child, you may be eligible for certain tax benefits. It might be worth reading up on the Child and Dependent Care Credit, the Child Tax Credit, and, for lower-income parents, the Earned Income Tax Credit.

There’s also an adoption tax credit, which offers tax incentives to cover the cost incurred if you adopted a child.

Consult a tax professional to see if you qualify.

7. Not Teaching Your Kids About Money

If kids aren’t taught the basics of financial literacy at a young age, they may struggle to balance a checkbook, make a budget, or save money when they’re older. Helping your children learn what it means to manage money by teaching them to save and spend their earnings can help set them up for financial success in the future.

You may want to introduce your children to money at a young age — kids love to play store, and by exchanging goods for money, they’re already beginning to understand the basic principles of commerce.

As they get older, you may want to try giving them an allowance in exchange for chores or homework completion.

You could even have them make a budget with their earnings, and encourage them to spend, save, and donate.

The Takeaway

New parents are often too overwhelmed to think a whole lot about managing money, but trying to avoid common financial mistakes could help the whole family, at first and much later.

If you’re a first-time parent and aren’t sure how to plan your finances, a money-tracking app could help. Your bank may offer one that can help you take control of your cash.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

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SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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