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Understanding Live Checks

What Is a Live Check and How Does It Work?
Austin Kilham
Austin KilhamUpdated March 6, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
You may receive an unsolicited offer in the mail that looks like a check made out in your name. If you’re in need of money, you could be tempted to cash it. But think twice before you do. A live check is actually a personal loan. And if you sign and cash it, you’ll be entering into a loan agreement you’ll be obligated to repay with interest.Read on to learn more about what is a live check, plus alternative options for borrowing money. 

What Is a Live Check?

The live check meaning is a check you receive in the mail from a lender made out to you. It may look like a typical check, but it’s actually a type of personal loanEssentially, a live check is a pre-approved personal loan agreement. All it takes to activate a live check is signing and cashing it. Once you do that, however, you enter into a loan agreement, and you have to repay the money with interest.

How Does a Live Check Work?

When you endorse and cash a live check, you're automatically in a loan agreement, typically for an unsecured personal loan. Terms for the agreement should be included with the check, but they may be in very small print. The money you receive can be used for a wide variety of purposes, but you’ll have to pay it back over a predetermined length of time with interest. The interest rate on a live check may be exceedingly high. 

How Do I Get a Live Loan Check?

Lenders that mail out live loan checks might be trying to drum up business. They may target those who have borrowed in the past and have a track record of paying their bills on time. Others might send out live checks without regard to a customer’s ability to pay.You may receive a live check during busy shopping and spending periods, such as the holidays or back-to-school time in the late summer and early fall. In other words, times when people need money.

Is It Safe to Cash a Live Check?

The first thing you should do when you receive an unsolicited live check is research the sender to find out if they’re a legitimate financial company. Check the Consumer Financial Protection Bureau website to find out if any complaints have been made against them. Even if the company is legitimate, only cash a live check if you understand the terms of the agreement you’re entering into and you’re confident you’ll be able to meet them. Otherwise, shred the live check to prevent anyone else from obtaining it and fraudulently cashing it in your name.

Pros and Cons of Live Checks

There are some pros and cons to live loan checks to consider. 

Pros of a Live Check

The main advantage of live checks — and the thing that makes them so tempting — is the ability to receive cash immediately. You’ve already been pre-approved for the loan. You don’t need to fill out an application, undergo a credit check, or meet a certain credit score.

Cons of a Live Check

There are serious disadvantages to live checks, however. The biggest drawback? Their interest rate is typically very high. In fact, annual percentage rates, or APRs, of live checks can be up to 80%. Like payday loans, which are a direct deposit personal loan, the interest rate and fees on live checks can be exorbitant.With these disadvantages in mind, it makes sense to explore other options if you need money.

Alternatives to Live Checks

There are alternatives to live checks that may have more favorable terms. These include:

Credit Cards

Credit cards may be a short-term solution if you need to cover an expense and you can pay off the balance quickly. However, credit cards have relatively high interest rates, as much as 19% on average, according to the Federal Reserve Bank of St. Louis. If you carry a balance, you’ll owe interest, and your debt may continue to grow.One option is to look for a credit card with a 0% introductory APR. As long as you pay the balance before the introductory period ends, you won’t owe any interest.

Personal Loans

With a personal loan, a bank, online lender, or credit union lends you a lump sum that you repay with interest in installments over time. The higher your credit score, the lower the interest rate you may get. You can compare personal loan rates to find the best offer you can qualify for. Once you’re approved for a personal loan, you may expect to receive funds quickly, typically within one to five days. How much of a personal loan you get can range widely. These loans offer sums from a few hundred dollars all the way up to $100,000. Another benefit of personal loans is that they’re flexible and can be used for a variety of purposes. 

Home Equity Loan

If you own your home, you can borrow against the equity you’ve built in it. Typically, you’ll need to have at least 15% equity in your home in order to take out a home equity loan. You may have anywhere from five to 30 years to repay what you borrow.Because a home equity loan is secured by your house as collateral, you could get a lower interest rate. However, if you fail to pay back the loan, the lender can seize your home to help recoup their losses. 

The Takeaway

A live check you receive in the mail is actually a type of loan. By signing and cashing it, you automatically agree to the loan terms. The interest rates on live checks could be extremely high and difficult to repay. Think twice before accepting a live check.If you need money, there are other options you can explore. For instance, if you’re considering a personal loan, Lantern can help you compare rates and terms. In our online marketplace, you can get offers from multiple lenders in just minutes. That makes it fast and easy to find the best, most beneficial option for your situation.

Frequently Asked Questions

How do I get a live check loan?
How does a live check work?
Are live checks safe?
Photo credit: iStock/rez-art

About the Author

Austin Kilham

Austin Kilham

Austin Kilham is a writer and journalist based in Los Angeles. He focuses on personal finance, retirement, business, and health care with an eye toward helping others understand complex topics.
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