A personal loan is extended from a
financial institution to a borrower purely for personal matters. Mortgage loans
are taken out specifically to buy homes, and car loans are taken out
specifically to buy cars. A loan given for personal reasons can be given for
any reason, from catching up on bills to buying Christmas presents or
purchasing a new television. In the case of a payday loan lender, it is not
even asked what the money is being borrowed to cover.
When you go into a bank and ask for
a personal loan, they are going to ask a lot of questions. Personal loans can
be seen as risky, and they are not seen as essential to your well-being. In
most cases, a small loan to pay bills is going to be denied by big financial
institutions. They simply see it as too risky.
Also, larger financial institutions
look at the credit history of a loan applicant and consider their ability to
pay the loan back in the long term. Many people today simply cannot pass that
type of scrutiny, so they would never be approved for a personal loan offered
from a big bank or other large financial institution.
This is where the payday loan system
looks very appealing to many people. They know that they can go to a payday
lender and get the smaller loans they need without going through that close
analysis required with the banks. They know that they can be approved for a
loan without having their credit checked, and without being asked a million
questions about their personal finances. It is simply much easier to get a
payday loan than it is to get a personal loan from the larger institutions.
How a Payday Loan Works
A payday loan is extended based on
solid employment and regular paychecks. Lenders in this business do not care
what your credit report looks like, and they do not care whether a customer
would be approved through a bank or not. They simply do not care about anything
but proof that a customer has a solid job that brings in regular paychecks. The
paychecks do not even have to be large. Regular income is all that is required
to secure this type of personal loan.
This type of loan is also processed
extremely fast. While a bank may take awhile to go through the personal matters
of an applicant and give a decision, you can get a payday loan in a matter of
hours. You can definitely get the money you need within twenty-four hours from
most payday loan services.
What is the catch? There is always a
catch, and in this case it is that you have to pay higher interest rates for
this type of personal loan. You get fast money, and you do not have to jump
through hoops. You just have to agree to pay more interest than you would pay
through a bank or another large financial institution.
One final consideration is the fast
turnaround time for payment on this loan. The money is typically drafted right
out of your bank account on payday. That is definitely something to keep in
mind.
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