Payday loans versus bank loans
Being in the situation to apply for a loan is complicated enough by itself, but it is important to learn the difference between payday loans and bank loans. Not only these two things have a completely different set of interest rates, but you might even learn that you’re not eligible for a bank loan and be forced into getting a payday loan whether you want it or not. Here’s all about payday loans and their upsides and downsides compared to traditional bank loans.
When getting money fast is a priority
Time is probably the number one factor when deciding between payday loans and bank loans. If you apply for a loan in the bank, it will take days, sometimes even weeks for the whole process to be over with. The approval process in some banks lasts even longer than a month, and if you’re in need of money fast, you can forget about the banks. Payday loans, on the other hand, make it possible to withdraw money from your bank account within the next 24 hours of signing up for a loan, sometimes even after just a couple of hours.
Small vs. big loans
Although payday loans are a perfect way to get cash quickly, one of the biggest downsides of these kind of loans is that there is a limit on the amount that usually doesn’t exceed $1000. Depending on the country, most payday loans can go up to from $500 to $1000, and it’s rare to find a place where you can borrow more than this. It’s understandable due to the fact that most payday loans need to be repaid within a couple of weeks, and borrowing large amounts of money at one would make it almost impossible for you to pay them back so soon. Banks can lend way higher sums that can leave you in debt for months or years, but sometimes it’s the only way to get this much money. Good thing about bank loans is that the interest rates are relatively low and can stretch the payback process to be relatively painless.
Checking your credit history
When applying for a bank loan, you will have to answer a whole set of questions besides getting your credit history checked. If you have a history of bad credit, it’s very likely that the bank will refuse to lend you money, and the only option available is to get payday loans. With payday lenders, all you need to provide is proof that you’re currently employed, and in most cases a recent paycheck is all they need besides your name, address and bank account number. These loans are the last resort for people whose bad credit history makes it impossible for them to get a loan any other way. Even though it might sound logical for the majority of people using payday loans to be lower class, recent studies show that most of them are actually middle class, using this method for quick loans and small amounts of cash to pay for unexpected expenses.