The Payday Loan – The Facts
May 31st, 2011 | Author: weissheiss
The payday loan is a flexible and relative newcomer to the loans marketplace.
To understand how it is different, it is necessary to look at conventional loans and compare the differences.
Traditional loans are for large amounts of money (say from 1,000 upwards in to double figures) and are usually repaid over many months or even years.
In contrast, the payday loan is a loan for typically smaller amounts of money borrowed over short periods of time.
So, a typical case may be someone borrowing 100-250 for just a few weeks until they next get paid. That may be for any reason at all – perhaps to cover an unpredicted bill for car repair or just to pay for an anniversary special treat.
As such, the typical payday advance is not directly comparable to large-sum borrowing for things such as cars, houses and large furniture items, all of which are typically repaid over several years.
Other differences
There are several other reasons why these loans are significantly different:
- Due to the smaller sums, loan providers are typically more relaxed about applicants’ previous credit problems – this means that credit may sometimes be available to people that would struggle to obtain help from a conventional lender;
- They are often paperless and can be conducted entirely online;
-Repayment takes place typically when the borrower next gets paid and is often done via an automatic debit, thereby avoiding the potential for oversights etc;
- They are fast – if the application if agreed, the money may be in the applicant’s bank account within less than 2 hours, subject to the receiving bank accepting instant transfers. If not, the money could be there the next working day after the application has been accepted.
Uses
The typical payday advance provider, unlike the lenders of larger sums, does not ask for extensive explanations as to why the loan is required.
Of course, that is explained by the fact that the sums are smaller as are the lender’s risks but even so, this does spare applicants the sometimes embarrassing business of needing to explain why they need the loan and what they are planning to do with it.
To summarise
Loans, when sensibly used and managed, may make life just that little bit easier.
Certainly, for those that are experiencing a short-term problem one month, the payday loan may prove to be an extremely useful facility.
Posted in Payday Loans | 
Tags: Anniversary, Cars, Conventional Loans, Explanations, Loan Providers, Relative Newcomer, Sums, Typical Case