What Is a Live Check?

Live checks are actually personal loans. If you cash one, you'll have to repay the money with interest.
Apr 1, 2022

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If you’ve received a preapproved offer in the mail that looks like a check made out to you and ready to cash, know it’s probably not free cash. It’s more likely an unsolicited loan offer.

What is a live check?

Live checks are unsecured personal loans sent from banks or lenders to consumers who meet certain criteria, like a minimum credit score. Signing and cashing the check enters you into an agreement for a loan that you must repay with interest.

Live checks: The costs and risks

Lenders that offer live checks may not consider your job status, income or ability to repay a new debt. Often, the loans are unaffordable for borrowers who have other debts to pay, says Carolyn Carter, deputy director at the National Consumer Law Center, a nonprofit consumer advocate organization.

“Pushing credit on people when they haven’t actually asked for it can easily lead them to being overextended,” Carter says.

Mariner Finance sends live checks with annual percentage rates up to 36%. In 2020, Regional Finance mailed nearly 113,000 small loans ($500 to $2,500) to customers in the form of live checks, according to its annual report. Regional’s small loans carried a 42.1% APR on average that year.

Live checks sometimes have optional add-ons that effectively increase the total cost:

  • Credit insurance, also called payment protection insurance, is optional coverage that pays the loan balance if you can’t due to death, involuntary unemployment or disability. It’s usually unnecessary if the borrower already has life or disability insurance.

  • Refinancing may be offered if you can’t repay the loan. You get more cash and a longer repayment term, but also additional interest and potentially an origination fee.

Should you cash a live check?

If you’ve received a live check, take these steps whether you plan to cash the check or not.

Research the lender. Check if the lender is licensed to do business in your state through your state’s bank regulator. Visit the Consumer Financial Protection Bureau complaint database to see if the lender has complaints.

If you think the live check is a scam, you can report it to the Federal Trade Commission.

Read the loan agreement. Understanding the loan’s rates and terms helps determine its affordability. The agreement should detail the total annual cost of borrowing, represented as an annual percentage rate and including interest costs and fees; the number of required payments; and payment amounts.

Shop around. Compare personal loan rates and terms at credit unions, banks and online lenders. If you have bad credit, you may be able to get lower rates at federal credit unions, which cap rates on personal loans at 18 percent. You can also check rates and terms at bad-credit online lenders. Most run a soft pull on your credit, which has no impact on your credit score.

Focus on long-term solutions. Create a budget that tracks your spending, which can identify unnecessary spending and help you pay off debt or direct money to an emergency fund. You can then use cash for emergencies instead of high-interest credit.

Rip it up. Shred and toss the check in the trash if you don’t want the offer. It’s possible someone could steal your check, sign and cash it in your name. Several consumer complaints at the CFPB highlight the identity-theft risk of live checks.

If you never again want to receive a live check, you can opt out of unsolicited mail.

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