The Ins and Outs of High Interest Loans with Guaranteed Approval

High interest loans with guaranteed approval seem tempting when you need cash fast. You apply online or in-store and can get an approval decision in minutes. The lender doesn’t check your credit or income too closely. And you get the money deposited directly into your bank account.

But guaranteed approval comes with a big catch. You’ll pay sky-high interest rates, sometimes over 400%. And if you can’t pay back the loan quickly, you can get stuck in a vicious debt cycle.

So are guaranteed approval high interest loans right for you? Or are there better alternatives when you need fast cash? This article will explain everything you need to know about these risky loans

What Are High Interest Loans with Guaranteed Approval?

High interest loans with guaranteed approval are a type of subprime lending for people with poor credit or limited income, The loans go by names like

• Payday loans
• Bad credit personal loans
• No credit check loans
• Installment loans
• Title loans

Lenders market these loans as “guaranteed approval” because they approve almost every applicant. They don’t do intensive checks on your credit score, income, or existing debts.

Requirements are minimal. Often you just need:

• To be 18+ years old
• A regular income source
• A checking account
• Proof of identity

The guaranteed approval makes these loans easy to get. But it comes with a big tradeoff…

Sky High Interest Rates and Fees

Guaranteed approval loans charge extremely high interest rates. Here are some examples:

• Payday loans – Payday lenders typically charge $15-$30 in fees per $100 borrowed. This works out to a 391% average interest rate.

• Bad credit installment loans – Installment lenders advertise rates as low as 30%. But once you calculate the fees, the APR is often 100-400%.

• Car title loans – Car title loans technically have interest rates around 25%. But they have monthly fees equal to 25% of the loan amount. These add up to 300% APR.

• No credit check personal loans – No credit check loan rates start at 30% and go up to 400% APR when you include origination fees.

And that’s not all…

If you’re late with payments, the lender tacks on even more fees. A single late fee can be as much as $39.

The Debt Trap Danger

Because of the high rates, these loans can trap you in a cycle of debt. Let’s look at an example:

1. You take out a $500 payday loan due on your next payday.
2. But when payday comes, you don’t have the $575 needed to repay the loan.
3. So you pay a $75 fee to roll over the loan for two more weeks.
4. In two weeks you still can’t repay the $650 you now owe.
5. Over time you pay hundreds in fees just to renew the loan. You’re caught in the payday loan debt trap.

This happens all the time. In fact, over 80% of payday loans get rolled over within two weeks.

Debt traps aren’t just a problem with payday loans either. They can happen with any high interest loan.

When Are These Loans a Good Idea?

Very rarely! There are almost always better options than a 400% APR loan.

These loans may make sense IF:

• You need less than $250 for a week or two.
• You have a plan to pay it off quickly.
• You have exhausted all other credit options.
• Not getting the money would lead to huge penalties or costs.

For example, if you need $200 to fix your car and get to work, a payday loan fee may be cheaper than losing your job.

But that is an extremely rare scenario! Most of the time, a high interest loan only makes your financial situation worse.

Alternatives to Avoid the Debt Trap

Here are some options to get fast cash without the 400% APR debt trap:

Credit cards – Ask your issuer for a cash advance. The fees are lower than payday loans if paid quickly.

Rewards apps – Earn gift cards by doing things like taking surveys. Then trade the gift cards for cash.

Gig work – Drive for a rideshare service or make deliveries to earn instant cash. Apps pay daily or weekly.

Sell stuff – You’d be surprised how much you can make selling unused items on eBay, Craigslist, or Facebook.

Negotiate bills – Contact creditors directly and ask to delay payments by 30 days with no penalty.

Borrow from friends/family – Ask a friend or family member to loan you money at little or no interest.

401k loan – If your plan allows it, you can borrow up to 50% of your 401k balance.

Low rate personal loans – Banks and online lenders offer much better rates, especially if you have decent credit.

Credit union payday alternative – Credit unions offer small loans at 28% APR with no debt trap.

Local charities – Charities and churches sometimes offer no-interest emergency loans.

Employer Loans – Some employers give workers pay advances or emergency loans.

The point is – avoid high interest predatory lenders at all costs! See if any of the alternatives listed can help you get by until payday.

Warning Signs of a Predatory Lender

How can you tell if a lender is predatory rather than reputable? Be on the lookout for these red flags:

• Requires upfront fees
• Does not check income or credit
• Offers instant approval
• Has multiple consumer complaints
• Uses aggressive collections practices
• Tries to steer you into a loan you can’t afford
• Encourages rollovers rather than repayment

And if you see an offer for guaranteed approval, run the other way! Legit lenders will never guarantee approval without checking if the loan is affordable.

The Bottom Line

In most cases, high interest loans with guaranteed or instant approval should be avoided. The exception is a real emergency where you need less than $250 for a week or two and have no other options.

Otherwise, the risks outweigh any benefits. You’ll end up paying 2-10x as much as borrowing through conventional means. And failing to repay quickly can trap you in a downward spiral of debt.

Review all your options before choosing the high interest loan route. You may find a credit card cash advance, employer loan, or other alternative that meets your needs without the predatory terms.

And if you do take a payday, title, or installment loan, repay it as soon as humanly possible. The longer it drags on, the more it can damage your financial life.