Payday loans are more expensive to borrow when compared to the many other types of loans that are available out there. This is primarily because they are widely available and hence have high interest rates due to the increased risk to the lender. These loans also come in handy during emergency situations where you are short on cash and will be able to pay back the loan as soon as your next payday arrives.
How these loans work
These short term loans have especially been designed to help people with their various expenses until their next payday. After a person applies for this loan and gets approved, the loan amount is directly sent to their bank account which they have mentioned on their application. In most of the instances, the individual will have time until their next payday to payback the principal borrowed along with the interest that has been accrued on that amount during that time. However, some of the payday lenders will allow you to choose your own period for repayment.
Individuals that these loans are ideal for
Payday loans have a fast processing system, which means that the money will be in your account on the same day that you have sent in the application. This loan is hence feasible for all those individuals who are faced with a little emergency and are short on funds. These are also the individuals who have a stable job and hence are able to pay back the loan along with the interest on their next payday.
The expenses that they need to pay for are often those that they did not plan for to begin with and are now having difficulty in finding funding for them. The loans are a great solution to debt problems in the short term and they also help in covering any unexpected expenses.
- They are made available to you instantly. All you have to do is decide when you require a loan and you can get it on the same day that your application is approved, or the next day at max. However, this is not how many of the other loan categories operate, where users typically have to wait a long time before they can officially get a loan or even be approved for it.
- Users can get approved quite easily for payday loans since an excellent credit rating is not required for this loan type. In most of the cases, the payday loan companies will only ask consumers whether they have a stable job or not and the amount of money that they make in a month.
Payday loans are ideal for people looking for instant cash to pay off certain unexpected debts or expenses. And since you can easily get approved for them, there is no unnecessary hassle to these types of loans. The moment you apply, the loan amount can come to you within the same day.
If you find yourself in a situation where you are required to spend big amounts of money, or you need to merge few short term loans with one long term loan, then this is the right choice for you. Long term loans are: mortgages, student loans, boat loans, equity loans, car loans and some personal loans. Auto, car and home loans are secured loans, which means that your property is offered as a collateral in order to get a loan.
Long term loans will provide with ability to buy different things and you will have an ability to repay for them later, in any other conditions you wouldn’t be able to afford these things. For example: most people don’t possess 200,000 dollars in cash to buy a mansion, so they will use long term loan to finance that purchase. This type of loan and interest is repaid over 18 to 35 years. If you decide to take this type of a loan, you will have to work with your lender and make an arrangement on how much you will be able to repay every month.
LT loans have lower interest rates when compared to ST loans, credit cards and credit accounts. For a standard credit card you can have interest between 10 and 15 percent, depending on a type of a credit card. For a home loan the interest rate is between 3,5 and 5 percent. Home equity loans have similar rates.
Considering interest rates, the longer you end up paying a loan, the higher you interest will be. So you could easily understand cost for this type of a loan, for example you are taking a 100,000 dollars’ mortgage loan over 30 years with 5% of interest, total amount will be 193,255 dollars, if you don’t make additional payments. In this case you will be paying twice as much for your home, but in other conditions you wouldn’t be able to afford this type of purchase.
If you decide to take long term loan, this kind of a debt will restrict your monthly cash flow. Boats, cars, homes and other expensive things easily add up. If your total monthly income is 4,000 dollars and your living expenses are 2,500 dollars, you will have to set aside a 1,200 dollars for your mortgage payments, which only leaves you with 300 dollars of cash. It will be difficult for you to put away some money for rainy days or for college fund for your children.
In order to apply for this type of a loan, you will have to show the purpose to a lender and explain to him why are you borrowing the money. You will have to show good credit history and credit score above 700 is always welcomed. Evaluation of interest rates will be necessary; this will help you decide which long term loan is best for you. You will have to check if the lender is legitimate and has license for work, provided by state. It would be good to negotiate the terms of the loan, you will be able to spot any hidden penalties, fees and charges.
Since guarantor loans are more and more popular with each day and people are often interested in applying for them, they need to know everything about them to decide to take that step. In the spot of the interest are often agreement conditions as well as bank’s interest rates. Guarantor loans are called unsecured loans, but they are secured in other way, borrower has to have a second person, an individual who will sign the agreement as well and answer for your unfulfilled commitments. Most of the bank’s clients who are interested in guarantor loans ask different questions in purpose of clarifying the conditions and other important issues linked to these loans, some of the most frequently asked questions are these:
1. Who can be my guarantor? Guarantor can be anyone of certain age and employment status, this means the suitable guarantor has to be 21 or 18 years old which differs from country to country. Guarantor can be your close friend, relative, cousin or colleague of yours, it can be pretty much everyone, even the passer-by if he agrees to do this, which is unlikely. The persons who cannot be the guarantor are the persons that are financially dependent of you, for example your husband/wife.
2. What is the relation of credit score and approval of guarantor loan? Credit score is important for every loan you apply for, it shows to banks if you will be able to repay what you took for them or in other words are you reliable borrower, sometimes credit score can influence on rejection of your appliance, and if the bank decides you are reliable borrower, from your credit score they will decide on the amount of money they can lend to you. If you have bad credit score bank will often ask you if you have a guarantor and then look into his credit history.
3. What are guarantor obligations and responsibilities? Before becoming a guarantor, a person has to evaluate borrower’s position, will he be able to repay the loan and is he willing to pay instead him if not. When he is ready to take this responsibility, he can become a guarantor, if borrower fails to make monthly payments that are agreed in a contract or if he does not even bother to pay, guarantor will have to pay the debt borrower caused. If the unexpected circumstances happen such as borrower’s death or bankruptcy, guarantor will have to fulfill borrowers obligations, which is always determined in the agreement with a bank. That agreement has to be signed by a guarantor, so he could be informed about his responsibilities in case of borrower’s incapacity.
4. Can I afford taking a guarantor loan? If you are not concluding this agreement simply to leave your obligations to your guarantor, than you will have to think about financial situation you are currently in and if you are able to pay that loan back, if you are already in debts you should not do this. If the work is going good, you have to keep in mind that you will have to pay interest rates, not only the amount of money you took, so you have to calculate all of that upfront and then see if you are capable of taking a loan.
We all remember the expansion of loans directly from the seller to the identity card without going to the bank. And it is not always the case. Everything could end up without going to the bank, without submitting any documentation, but of course the price of these loans has caused a drastic drop in demand for them. Although they still exist in some banks, high interest rates on such loans are what leads to unpopularity. However, when a bank advertises that provides loan for two hours, the story does not go quite that simple.
If you want to loan the air, it does not mean that you are exempt from the documentation that you must submit to the bank for a loan.
On the contrary, proper documentation is first and foremost you have to have them. Thus, the demand for credit will receive one of the officers, review the submitted documents enter additional information if there is a need for it.
The request will be entered in the internal application of the banking information system, which withdraw the report from the credit bureau, for scoring, client categorization and assessment of credit standing and the principle. The request shall be forwarded electronically to the decision Credit bureau. The members of the credit bureau in the application itself give their consent to an extension of credit, in order to finish up the approval process.
This means that after the approval of the credit committee, printed decisions of the credit committee of the loan approval and other supporting documentation, that the members of the credit committee will physically be signed. All that the members of the credit committee shall sign in such procedures is sent by internal mail and not brake in the form of loan approval.
Of course, such applications are designed to be printed directly from them and credit agreements and the repayment plan, the payment slip for payment of bank fees, insurance and all other supporting documents.
And really, the time frame of two hours should not be debatable except in case you happen to crash the system, so that, for technical reasons, cannot do a loan for such a short time.
Banks will be expeditious when they have a reason for it. High interest rates that accompany this type of loan approval, high commissions, and even commissions paid annual loan administration with limited maximum loan amount the reason for the existence of such loans.
And this is possible only for cash loans to a certain extent that the bank does not require the provision of insurance except for loans and promissory notes.
Because if you want to buy a car on credit and you are required to put a pledge on the car loan cannot be completed in a day. And if you are buying an apartment that you need at least two months of patience.
Banks are checking every detail of documentation that you submitted, in order not to be deceived and damaged. The higher the loan amount, the greater the risk of the bank and that means more detailed verification of the client and the collateral offered.
A loan is designed to serve as the mean of short or long-term financial help for the people who need a specific sum of money for different purposes such as setting their own business, purchase of a house or building a home addition, handling the unexpected expenses or repaying another loan.
The terms of loans are generally governed by a contract between the borrower and the lender. The contract includes the amount of money, the level of interest rate, the ways how the borrowed amount will be repaid, and the period of the loan. Once the borrower signs the contract, he is obliged to comply with the all the requirements of the contract. Furthermore, the contract also includes additional fees if the borrower doesn’t repay the loan.
In the case of large sums of money, the borrower will be obliged to pledge some kind of security which will serve as a guarantee if the borrower doesn’t make the agreed repayment.
Luckily, there are types of loans where this kind of security is not necessary. On of these types of loans is a payday loan. The borrower’s paycheck is the only security he needs when taking the payday loan. Today, most of the lending companies have online services which allow customers to get the payday loan very quickly without any trouble.
But even though the amount of money might be very small, the interest rate can be extremely high. So this type of loan carries considerable risks. It is even more risky for the family where only one member is employed. One loan will lead to another and this can be very dangerous for people who rely on this style of the loan.
Before lending any money, the person must be acquainted with every possible risk that the loan may bring. Also, it is very important to select a reliable and reputable lending company or a bank. Interest rates may vary from company to company, so it is advisable to select the one that charges the lowest interest rate. When the person is in trouble, every minute counts and every moment is precious but such a decision should not be taken without consideration and without knowing all the facts and possibilities.
But most of all, every borrowing should be avoided as much as possible because no matter how attractive and harmless these offerings may appear, they all carry a certain degree of risk that should be taken into consideration.
We all need money and the opportunities to borrow a specific amount of money may seem as the best solution to our problems. But in fact, these loans are not made for the sake of the common man in order to help him to deal with his expenses. They have nothing to do wit the well being of a common citizen. They are created to make more money on the account of an ordinary man who is in financial trouble. Thus, every person should be aware of these facts and borrow responsibly. Only in this way, the loan will be useful mean of dealing with the financial problems.
Loans, whether they are borrowed from a family member or from a bank, always carry a considerable degree of risk. We are aware all the time that the borrowed amount of money has to be repaid and the pressure is getting bigger and bigger. However, no matter how much we are willing to pay off debt, sometimes we are not able to repay the loan due to unforeseen circumstances. The debts are becoming bigger a money is becoming growing need.
As a result, the new loan is the most probably the outcome of such a situation.A payday loan is only one and the most attractive type of loan available.
When borrowing from a lending company, the lack of information may be the biggest problem. Even the payday loan, which might seem as one of the best offers among all borrowing services offered by banks, has its drawbacks as well as its advantages.
One of the biggest advantages is the fact that you can easily get the amount of money if and when you really need it. Assuming that you have the problem that can be easily solved with the small amount of money borrowed from the lending organization and you are so desperately in need of that sum, then this loan service is a real boon. You will repay the debt from your next salary and manage to live the rest of the month from the amount that remains. It is fine, it the borrowed amount of money along with the interest rate that you will have to pay doesn’t exceed the amount that will remain.
But usually, this is not the case. The lenders generally use the holes in the law and the usury is one of the biggest consequence of all that. In plain words, usury is the practice of lending money and charging the interest rate at an exorbitant amount which exceeds the legal rate. Is it necessary to say that these companies use this opportunity in every possible way and that the borrower is always at a loss?
The interest rates on payday loans are very high. They usually exceed the 200 percent. This means that almost whole of your next salary will be needed to repay that debt. When considering using the payday loan service, it is very important to have all these things in mind. If you have an additional source of income, then you can use it until you repay the debt. But if you are aware that you will be in trouble for the whole month, then reconsider your decision.
One likely result will probably be taking a new loan in order to repay the previous one. And that is exactly the possible scenario that each person tries to avoid. Even though the payday loans have a bad reputation, they can be a very good way to solve financial problems but only if they are used responsibly and wisely. The payday loan is not neither better nor worse than the other types of loans.