Feb 24, 2015

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Short Term Payday Loans versus Standard Loans

Short Term Payday Loans versus Standard Loans

If you are looking to get a loan, there are many options available to you. You could go up to a bank and fill out a loan application. Or, you could head out to a company that offers short term payday loans and sign up for one. However, the two must never be confused. There are major differences between getting short term payday loans and applying for a bank loan. Here’s a brief guide:

The Bank Loan

A payday loan is very different from a standard bank loan. In order to get a standard loan, you will have to contact a bank or a lending institution. The lending company will require you to fill out some paperwork. Usually, this consists of several documents. There’s an application form that must be filled out. This includes all relevant details such as your address, job details, etc.

Once the application has been filed, the lending company will process it in a few days. If it is approved, you will be required to submit documents that verify the information submitted on the application. Then, it will take a further few days for the lending company to complete your documentation and hand over the loan amount. The loan is usually paid off in monthly installments. The lending company will obviously charge an interest fee for the loan amount. The interest rate charged depends upon the current market rate on the day the loan was approved. The calculation of the interest rate also depends upon a person’s credit score.

Standard bank loans have a lengthy processing period. It can take anywhere between 15- 30 working days to get the application approved. Hence, these loans are best taken out in larger denominations. The repayment period is also quite long. Banks offer repayment options of up to five years.

Payday Loans

Short term payday loans are a completely different from bank loans. For starters, they are offered by private companies. Any lender who wishes to offer payday loans can simply set up their shop or online website and provide their services. Secondly, the application process is also much easier.

All you have to do is fill out an online application and wait for the lending company to process it. Since short term payday loans are usually of smaller denominations (they don’t go higher than $1,500), it doesn’t take more than a couple of days for the company to process the application. The loan amount is credited to the borrower’s bank account within the week only. These loans are usually repaid in a month, by making one lump sum payment. Commonly, lending companies require borrowers to deposit a postdated check for the due date before giving the loan.

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