What Are Live Checks and How Do They Work? (original) (raw)

Last Updated: Sep 5, 2024

If you get an unsolicited check in the mail, be careful — it could be a live check. A live check is an unsecured loan that lenders send to potential borrowers in the form of a paper check that can be immediately signed and deposited.

Read on to learn more about live checks, how they work and the pros and cons of using them.

Andrew Dunn Editor Andrew Dunn Senior Editor

Andrew Dunn is a veteran journalist with more than a decade of experience in the business and finance arena. He is a two-time “Best in Business” award winner from the Society of Business Editors and Writers.

Editor Valicia France Editor Valicia France Contributor

Valicia is an accomplished author and a Junior Copywriter at Uncanny Content. She believes that words can help create a better world, which is why she helps impact-driven businesses increase their visibility and drive change through results-driven writing. When she’s not tapping away at her laptop, Valicia enjoys spending time with her family, exploring nature or sitting in the candlelight with an exciting fantasy novel. You can connect with Valicia and learn more about her on LinkedIn.

Editor Valicia France Editor Valicia France Contributor

Our Research Process

Here’s a breakdown of how we reviewed and rated top personal loan providers

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33 Providers Rated

Our team researched more than two dozen of the country’s most popular personal lenders, including large online companies like SoFi, big banks like Wells Fargo, and peer-to-peer lenders like Upstart.

660 Data Points Analyzed

To create our rating system, we analyzed each personal loan company’s disclosures, licensing documents, marketing materials, sample loan agreements and websites to understand their loan offerings and terms.

41 Loan Features Tracked

Our team regularly collects data on each company’s loan offerings and terms, such as minimum and maximum loan amounts, origination fees and discounts.

17 Professionals Consulted

Before we began our research process, we consulted with financial advisors and industry experts to ensure our evaluations covered the banking product aspects that matter most to potential customers.

How Do Live Checks Work?

Whenever you receive a live check in the mail, it is not because you applied for anything. Instead, lenders screen potential borrowers by considering a minimum credit score. The lender initiates a pre-screening process by reviewing your creditworthiness, and if you’re considered eligible by its standards, the lender may send you an unsolicited live check.

Live checks are unsecured loans sent as paper checks that are immediately available to cash. These live checks can be deposited through mobile banking apps with standard mobile deposit features. You can also deposit live checks at ATMs or your local banking branch. Once you sign the back of the check and deposit it into your bank account, the promised funds are transmitted electronically and will be available for immediate use.

Depositing the live check is a virtual signature indicating your agreement to the loan terms, which are sometimes in small print. The loan repayment period and annual percentage rate (APR) will vary — but they’re often considerably less favorable than personal loans and credit cards.

It’s important to remember that a live check is not free money — it’s a loan that you will have to pay back at a steep cost.

>> Related: Learn more about the secured loans

Pros and Cons of Live Checks

Getting a live check in the mail may feel like winning free money. However, while there are some advantages to receiving a live check, there are also some significant disadvantages to consider.

Pros

No application required: Potential borrowers who receive live checks did not and will not have to apply to use the funds.

No hard check on credit score: Lenders do not run a hard credit check before sending the funds, which means your credit score will not be impacted as long as you pay the loan back according to the lender’s terms.

Immediate use of funds: The promised funds can be used once the check is signed and deposited using standard deposit methods, including ATMs, bank branches or online via a mobile app.

Cons

Unsolicited loans: Live checks are sent to you without your permission. Lenders pre-screen customers they consider eligible and then mail them the live check in hopes that they will deposit it.

Unclear terms: It can be easy to miss the loan terms on the live check. Consumers have deposited and used the funds, unaware they have committed to the loan’s terms.

Often significantly higher APRs: Live checks tend to have interest rates that are relatively higher than credit cards or other types of loans, making it challenging to repay the initial loan. Consumers have often had to access other loans to help them repay the initial live check personal loan.

Frequently aggressive collection methods: Consumers have reported lenders being aggressive in collecting the funds, going as far as showing up at their homes or harassing them at work.

An easy target for fraud and scams: Live checks are easy to deposit, and the funds are readily accessible. Consumers have experienced fraud with users forging their names and depositing the funds, leaving the original intended borrower responsible for repaying the loan. Others have fallen for live checks sent by scammers.

Signing and Cashing Live Checks

Here are a few things to remember regarding live checks to prevent fraud. Live checks can, unfortunately, be signed and deposited by anyone through a mobile banking app, ATM or during an in-person visit to a bank. Only sign the live check just before you deposit it at your bank, always securing it in a safe place before you do so.

Live checks can also be sent to an old address. So, whenever you move, sign up to have the postal service forward your mail to your new address. If you don’t have a new address yet, you can pause mail service for up to 30 days.

In short, if you decide to use the check, handle it carefully to ensure it doesn’t fall into the wrong hands. If you don’t want to use the check, immediately shred it. The Fair Credit Reporting Act also gives you the right to opt out of (pause or completely stop receiving) these offers. You can opt out for five years by calling 1-888-5-OPTOUT (1-888-567-8688) or opt out forever by requesting the “Permanent Opt-Out Election form” at Opt Out Prescreen.

>> Related: Learn more about how to endorse a check

Alternatives to Live Checks

Due to the high interest rates and inflexible repayment terms, it may be in your best interest to consider other options for funds. Alternative options include a friend and family loan, a personal loan, credit cards, cash advances on an existing card, credit card loans or a payday alternative loan.

If possible, consider asking for your desired loan amount from a friend or family member. Money can be loaned at low or no interest and repaid over a mutually agreed-upon time frame. It may be beneficial, however, to draw up an agreement for the use and repayment of the funds, which you need to ensure you adhere to, so you avoid damaging your relationships.

Personal loans can also provide low-interest loans to borrowers with high credit scores and may provide funds of between 1,000and1,000 and 1,000and100,000 to eligible borrowers at interest rates between 6% and 36%. Credit cards may be available but at a relatively higher interest rate than traditional loans, starting around 20%.

However, 0% introductory interest offers may be available for qualified borrowers. Pre-approved loan offers from your existing credit card may also be another option to consider. You must repay the loan and credit according to lender agreements or risk the defaulted debt impairing your credit history.

Other options include taking out a cash advance or Pledged Asset Line (PAL). With cash advances, you’ll be borrowing cash against your existing credit card, which has to be repaid per lender guidelines. PALs, which were created in response to predatory payday loans, are offered by some federal credit unions and are an option for members with subprime creditworthiness.

Borrowers with PALs may be eligible for between 200and200 and 200and1,000, which must be repaid within one to six months. However, because cash advances and PALs are considered risky for lenders, interest rates will generally trend higher than those for credit cards, credit issuer loan offers and personal loans.

>> Related: Learn more about the** best personal loans**

The Bottom Line

When strapped for cash, receiving a live check in the mail might seem like just what you need. However, it’s critical that you understand that a live check is a pre-approved offer for a loan from a brick-and-mortar or online lender who has reviewed your credit report. Signing and depositing the loan will tie you to the terms written on the loan, which can include a high interest rate and fees.

Instead of cashing a live check, consider reviewing alternative payment options. You can access fast cash for small amounts through a cash advance or a payday alternative loan or by accepting a loan offer from your credit card company. If you need higher fund amounts or a longer repayment term, consider applying for a personal loan or even a credit card with an introductory rate offer and low APR. Reaching out to friends and family members may also be an option for receiving a loan with low interest and flexible repayment timelines.

Live checks are easy and accessible to the consumers who receive them in the mail. However, the ease of availability and use may not outweigh the disadvantages of cashing the live check loan. Consider reviewing your options to find a loan or credit option that provides access to the funds you need with more beneficial and flexible terms.

>> Related: Learn more about payday loans

Frequently Asked Questions About Live Checks

Live checks are sent by lenders who pre-screen potential borrowers to determine if they meet the criteria to receive the live check. This means that you can receive unsolicited mail containing live checks unless you choose to opt out of receiving unsolicited offers. A few lenders who send live checks include Regional Finance, Republic Finance and Mariner Finance.

You can receive a live check in the mail from any lender without submitting an application. These live checks are unsecured loans with considerably high interest rates that you often must pay back in a few months or years. Live checks can be deposited using standard banking methods, including mobile apps, ATMs and with a teller at a bank branch.

Unlike regular checks issued by a person or business, live checks may not have a typical expiration date. These checks are more of a marketing ploy that lenders use to get new customers. The valid period for using the check may be outlined in the loan terms written on the check. However, after a few months or years, loan terms may be outdated and no longer match what is provided on the check. In essence, you could be agreeing to much more unfavorable terms than you realize if you deposit an old live check.

A reserve live check is different from an unsolicited live check loan. A reserve live check is issued by a fund or lending institution intended for future use, like protecting a savings or checking account against overdraft funds. To use this type of reserve live check, you must activate the reserve check in some way, like by calling customer service, visiting a branch or going online.

Editor’s Note: Before making significant financial decisions, consider reviewing your options with someone you trust, such as a financial adviser, credit counselor or financial professional, since every person’s situation and needs are different.