No Credit Check Payday Loans
I have a friend who makes a ton of money by providing no credit check payday loans to people. It has been interesting to talk to him about how it works, and I thought I might help some people out by exposing the truth about these loans.
According to what my friend says, they can still make a TON of profit even when only 50% of the people taking out loans actually pay them back. This situation occurs because of the extreme amount of fees and interest being charged for these loans.
With payday loans, you are required to pay off the loan IN FULL by a specific date – usually 14 to 30 days after you take out the loan. If you don’t, you will be charged fees and the interest is recalculated. Here’s an example of how it usually will go:
Danny takes out his loan on 8/11. He agrees to pay $10 for every $100 borrowed at that time. Since Danny has borrowed $500, he will owe $550 on 8/24 (fourteen days later). If he pays off the loan in full, on time, it will be over and he won’t be charged any fees. However, if he doesn’t pay the loan off in full by the due date, he will then be charged a fee and another round of interest. His fee will probably be around $20, and then the interest will be another $10 per every $100 he owes. That means on 8/25, Danny will now owe $570.00 + $57.00, which comes to $627.00. Please keep in mind this is after two weeks.
When we reach 9/7 (another 14 days), Danny will owe $647.00 + $64.70, which is $711.70.
On 9/21, Danny will now owe $731.70 + $73.17, which totals $804.87.
On 10/5, his bill has reached $824.87 + $82.49, which totals $907.36.
On 10/19, Danny is looking at $927.36 + $92.74, which is $1020.10.
Can you see how ridiculous this becomes? These companies that try to sell you on taking a no credit payday loan are making money like bandits, while you are going to pay everything you make just to get out from under this loan! In a situation like this, Danny (like a lot of people) would probably take out a second payday loan from another company just so he can stop the insane interest and fees on his current one.
These companies are able to stay in business, despite the terrible rate of loan completion, simply because they are charging ridiculous, near-criminal fees. I found myself personally very disappointed that my friend was running this sort of business. While I understand that in some situations these types of loans can help people, I dare to say that most of the time people are getting in way over their heads. This behavior can become addictive, and it creates situations that people are having a really hard time getting out of.
If you decide to take out a no credit payday loan, please at least take the time to shop around for the best deal. Be sure to look at a lot of lenders and compare their details, fees, and rates.