Worldwide economic conditions are not consistent. There are always risks about people to lose their jobs. Apart from that, many are willing to start a business instead of monotonous and unreliable job for better financial status. This may include a UAE company registration or opening a New York-based real estate business. These and several other matters force people to take loans for various reasons. But if the situation is grave and credit rating is low, then people go for high risk loans. These are the debts that are extremely difficult to pay back.
These are available without viewing the income or assets of the applicant. They are commonly known as No Income Verification (NIV) or No Documentation loans (no doc loans). These advances are easier to get but lenders apply several rules and conditions to protect them from any loss. There are also payday loans and few other debts in this list.
Following are few of the most important things that you should know before taking different types of high risk advances.
No-doc loans are easy to qualify but risky
These types of loans are usually provided for self-employed and other such persons that can’t provide tax returns as evidence of their income. Lenders usually accept BAS (business activity statements), bank statements or accountant’s declaration to qualify them for these loans.
But there are several risks involved in these loans. The interest rate to be paid on them is higher than other conventional loans. Fee on them is also higher. There are also reports of adoption of irregularities by banks while lending money to people regarding NIV loans.
Therefore, it is important to look closely at the conditions of these NIV or no-doc loans before making an agreement. Otherwise, it can create legal issues in future.
Payday loans are expensive
Another high risk credit is the payday loan (also known as short term, payday advance etc.). Considering the cost and risk involved in it, this should be the last choice one should make. They must be avoided unless you are sure to pay them back in time. It is because they cost more than their worth. There is a possibility you may have to pay 800% APR (annual percentage rate) on these payday loans.
The main advantage of these loans is similar to other high risk loans that can easily be acquired. On most of occasions, you only need few necessities to bring with you including your ID, bank statement, date of next pay etc. for approval. They are not only easy to get quickly (may be on the same day) but they also don’t require credit check.
There is a misconception that paying these loans in time will assist you in building your credit. Unfortunately, that doesn’t happen.
Now, few banks and financial institutes are also providing online loans. In fact, it is one of the best places to get high risk credits. It is because only those debts are available online where there are far more chances for eligibility due to less requirements. Such types of loans have few advantages.
First thing is that you can avoid embarrassment by contacting for loan face by face without having credit rating. Secondly, the amount of such advances available online is less as compared to other high risk debts. This is good thing in long term as it saves you from taking more loans that are difficult to pay back and creates problems.
Mona is working as a business consultant and content writer in Riz & Mona Consultancy, a Dubai-based consultancy firm. She has writing experience of over 6 years. During her career, she has written for number of business and investment related subjects including loans, credit cards, real estate, trade, investment management, small business, taxation and others.