Payday loans are quick loans that can be taken relatively easily. For some, they are a good alternative to bank loans and credits, while others are associated with the danger of losing financial liquidity. How is it really and is it worth using them?
It is worth remembering that the issues related to bank loans and loans granted by loan companies are regulated by law. The Consumer Credit Act defines, among others rights and obligations of the borrower and the institution granting the loan.
Quick payday loans – product characteristics
In contrast to cash loans offered by banks, payday loans proposed by non-bank institutions sometimes do not require full verification of the potential borrower. On the market there are offers of payday loans without BIK and KRD consisting in the fact that the ability to pay the liability the loan company checks without verification of the borrower in important databases: the Credit Information Bureau and the National Register of Debtors. This means that people with bad credit history can sometimes use a payday loan from a loan company, even though a bank, even for the same amount, would not be able to grant a loan. The exact comparisons necessary to choose the right product can be found on the ikalkulator website.
Another important difference between payday loans and banking products is the maximum amount of debt. Payday loans are usually loans for small and medium amounts. There are loan offers up to tens of thousands of USD, but loan offers up to several thousand USD dominate the market. In the latter, the most popular option, the repayment period is shorter than in the case of banking products – sometimes it is only one or two months.
Can payday loans be dangerous?
The danger of quick loans granted by non-bank institutions is associated with high interest rates. Sometimes, when deciding to incur a liability, they forget to check the total interest rate. The basic duty of everyone who faces the choice of a non-bank or bank loan is to verify the APRC of each offer, i.e. the Actual Annual Interest Rate. The APRC of some payday loans can even be alarming several thousand percentage points.
However, this is not everything to watch out for. It also happens that in addition to the interest rate, the lender provided additional fees in the contract for the act of granting the cash itself. It is crucial to thoroughly familiarize yourself with the offer and, above all, the loan agreement before it is signed. Apart from some offers addressed only to people who have never used payday loans, banks always have a better financial offer.
For whom payday pay may be a good solution?
Although loans used by institutions other than banks have been associated with products associated with people with low creditworthiness or bad credit history, several examples successfully break this stereotype. Fast loans are increasingly used by students and freelancers. They have confidence that they will receive their salary, but often also have difficulty getting it on time. Then a quick loan for a small amount can help, to cover urgent expenses.