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Are Payday Loans and No Credit Check Loans the Same Thing?

Alex Huntsberger
Alex Huntsberger has covered loans, credit scores, and personal finance for OppLoans since 2015. He is a graduate of Oberlin College and a regular contributor to the Chicago Sun-Times.
Updated on May 6, 2021
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Payday loans don't require any kind of credit check, but they are one of the riskiest kinds of no credit check loans out there.

When you’re dealing with an emergency, it can be hard to pay attention to details. Your adrenaline is pumping, your nerves are shot, and a lot of the information you encounter just washes over you. Before you know it, you’ve been staring at the same form for 10 minutes, reading the same paragraph over and over, not retaining any of it.

If you don’t have an emergency fund to cover unforeseen expenses, this adrenaline-fueled brain fog could get you in trouble. Even though you think you know a lot about fast cash loans, you could easily end up in the clutches of a predatory lender, all because you didn’t understand the kind of loan you were signing up for.

For instance, you might have bad credit and need a loan that doesn’t do a credit check. You see an ad for payday loans online and you wonder if this is something you should be applying for. What’s the difference between a payday loan and a no credit check loan, anyway? Are those just two names for the same thing? Don’t’ worry, that’s exactly what we’re here to fill you in on.

What is a no credit check loan?

It’s right there in the name: no credit check loans are products that don’t require a credit check with your loan application. Specifically, they do not require a hard credit check, wherein a lender requests a full copy of your credit report. Hard credit checks also get recorded on your credit report and can ding your score for up to two years.

Some no credit check lenders might still perform what’s called a “soft” credit check when you apply for a loan. Similar to a hard check, a soft credit check returns info about your borrowing history. Unlike a hard check, however, a soft check returns much less information and does not affect your score. Some lenders might also ask for proof of employment and/or copies of your bank statements to confirm that you draw a paycheck.

No credit check loans are a type of bad credit loan. These are products designed for people whose poor credit scores lock them out from traditional personal loans. Bad credit loans come with much higher interest rates than loans from regular lenders, but they also give critical access to credit for borrowers who otherwise wouldn’t have any access at all. Still, there are many no credit check loans that can be outright predatory, designed to trap borrowers in a constant cycle of debt.

(For the full story on no credit check loans, check out the OppU Ultimate Guide to No Credit Check Loans here.)

What is a payday loan?

Payday loans are a type of small-dollar no credit check loan, which means that payday lenders do not check your credit when you apply for one of their loans. They are very short loans, with an average repayment term of only two weeks—the idea being that the loan will be repaid on the day the borrower receives their next paycheck. That’s where the name “payday loan” comes from.

The standard process for a payday loan looks like this:

A customer walks into a storefront and asks for a loan. The lender then either takes a postdated check from the customer for the amount borrowed plus interest or they sign the customer up for an automatic withdrawal on the loan’s due date. They then hand the customer cash and the customer walks out the door. Two weeks later, the payday lender deposits the check or withdraws the funds from the customer’s bank account.

While the cost of a payday loan varies from state to state, they have an average annual percentage rate (APR) of almost 400%. And while those high annual rates don’t matter so much if you pay your loan off on-time, many payday loan customers find that they have trouble doing just that.

Some payday lenders even allow borrowers to roll their loan over, extending the due date in return for paying additional interest. In other cases, payday loan customers will have to pay their loan off and then immediately take another out to cover additional expenses.

Loan rollover and reborrowing can easily turn into a predatory cycle of debt wherein the customer keeps paying more and more interest towards the loan without ever paying any of the principal amount they owe. That’s how a 15% interest-charge on a two-week payday loan can add up to an annual rate of 391%.

How are payday loans different from other no credit check loans?

There are many different types of no credit check loans, and payday loans are one of the most common types. Still, there are ways in which payday loans differ from other no credit check loans. Some of these differences make payday loans a better option, but many others make them one of the riskiest types of no credit check loans out there.

Payday loans generally have the shortest payment terms of any no credit check loan. Title loans, for instance, have an average term of one month. While the short terms for payday loans might seem convenient, that quick turnaround can make them extremely difficult to repay on-time. And while no credit check installment loans let you pay your loan off a little bit of a time, payday loans have to be paid off in one lump sum, which can add to the hardship.

You can’t borrow as much money with a payday loan as you can with other types of no credit check loans, which can be both a plus and a minus. Smaller amounts of money mean that a payday loan can’t be as helpful in an emergency, but it does mean that you’ll have to repay less money overall. Meanwhile, an installment loan with manageable payments lets you borrow more money overall while keeping your loan payments affordable.

Unlike payday loans, which have no collateral requirements, title loans are secured by the title to your car or truck—that’s how they got their name. Using your car as collateral means that you can usually borrow more with a title loan than you can with a payday loan, but it also means that your car can (and likely will) get repossessed if you can’t pay the loan back on-time. Say what you will about payday loans, you won’t lose your car if you default on one.

There are probably better options than a payday loan.

All in all, payday loans carry many risks, so many risks that you should avoid taking one out if at all possible. Putting money on your credit card could be a better option than taking out a payday loan.

Title loans should also likely be avoided, but a responsible bad credit installment loan might be a good way to pay for emergency expenses. There are plenty of online loans out there—just make sure you do your research first! Do it now, so you’ll be prepared later on when you don’t have time think.

Not all no credit check loans are payday loans, but payday loans are likely one of the riskiest types of no credit check loans you can find.

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