Have you decided to buy something that is very expensive for you at the moment or maybe faced an emergency that must be dealt with without delays? There are two most popular ways out: a bank credit and a payday loan online. Nowadays modern people often give preference to internet loans, however, there are still those who trust banks more. It is recommended to weigh all pros and cons of both types of financial help before taking a decision, which may play an important role for your credit history.
Each type of getting money has its own peculiarities, which should be taken into account when giving preference either to one or to another method of getting the necessary amount of money.
Major Features of Bank Credits and the Same Day Payday Loans
You can compare the main features both types of getting a credit have.
First, look at what bank may offer you:
- A bank provides credits to good credit borrowers,
- The borrowing process requires to provide a lot of paperwork;
- Taking a decision may take several days;
- A lot of banks require some collateral to provide.
Now let’s look at the basic differences, which payday loans from alternative lenders have:
- A payday loan is provided via the internet without faxing;
- Payday lenders offer money to both good and bad credit borrowers without requesting to give them something of value for the period of credit use;
- Payday loans are short-term loans intended to support you till the payday.
- The decision will be taken within minutes and in case you are approved you will receive your loan the same day or not longer than one business day, depending on when you submitted a loan application.
How Banks Access Your Ability to Pay Back
It is no secret that today it is not easier to take a big loan in a bank than before. Moreover, this is beyond the power even of regular customers of banks, who have a positive credit history for ten years. And the terms of lending for such trustworthy customers are no different from the conditions provided to ordinary citizens. And, as you know, in order to issue a loan, you need to collect a lot of documents proving the solvency of the borrower. All this seriously affects people who have to pay the right fees on the loan, consisting of the so-called body of credit and interest on it.
The interest rates for such customers are exactly the same as for people who constantly delay payments or do not contribute them at all. This is due to the fact that the bank includes possible losses from such defaulters in its interest rate, and thus it turns out that the losses to the bank are compensated by serviceable payers. The situation is aggravated by the fact that banks for some reason refuse to provide information about unreliable customers to other credit institutions. And the cause here is both greed and foresight.
Do Banks Keep Information about Your Credit History?
Information about bad and good clients is an excellent hint for competitors, and only it is worth sending such information to the credit bureau, as immediately any of the banks can “lure” trusted customers with more interesting conditions. Of course, every bank is afraid of this. Banks are afraid and that information about problem clients will become known to investors who invest their money in this bank. Investors will quickly realize that there are difficulties with the receipt of funds in this bank, and they may go to another bank.
Therefore, the credit history bureau is not able to force all credit institutions to combine their customer databases. Participation in the submission of information is absolutely voluntary, and banks even deposit a special item in their loan agreement about the client’s consent to transfer information about him to the office, but this is practically not used. When the borrower refuses to sign this clause of the contract, in theory the bank should deny him a loan (this should at least alert those who make a credit decision), but in fact one may see that loans to such people are issued, albeit with a risk to the very bank (the possibility of obtaining another defaulter).
In resolving the issue of the borrower’s solvency, the bank relies entirely on the security service. It is this department that deals with finding out the real income of the client, the availability of valuable property. This procedure is rather laborious and also ineffective, because having an apartment and a car, a person can shy away from payments on the loan. To return money, the bank is forced to spend money on the procedure for selling the borrower’s property.
When Can Banks Require to Have a Guarantor?
As a rule, a guarantor is required in cases when the bank manager is not sure that the borrower is able to independently fulfill the loan obligations. It happens that the official income is not enough to issue a loan, and the client cannot confirm his additional earnings. Negative credit history can also raise doubts. And, of course, you cannot do without surety, when a very large amount of money is borrowed.
When registering a mortgage, the requirements for sureties are such that they can only be close relatives. If the crediting period is small, then any person, whom the bank will assess as solvent, can act as a guarantor. But all this is very conditional. In some cases, relatives deserve less trust than just acquaintances. To avoid possible frauds with the assignment of the spouses for each other, banks consider only those guarantors who are more financially secure than the borrower. And in general, the requirements for them are the same as for the client.
- The guarantor must provide the following documents: a passport, a certificate of the identification number. If he is married, he needs a certificate of marriage, a passport of the spouse, a certificate with its identification number. If the guarantor is an employee, he needs a certificate confirming this, as well as a certificate of income for the past six months.
- The guarantor’s liability begins after ten days from the moment when the borrower for any reasons ceased to make payments on the loan. If within five days the guarantor does not extinguish the debt of the borrower, then the bank has the full right to apply to the court to recover the debt. But often creditors do not immediately transfer the case to the courts.
- As a rule, they try to settle the issue peacefully and somehow agree. As a result, it takes another three to six months, after which the problem is handled by the court. And in the case when the borrower shies away from paying off the debt, the guarantor is responsible to the bank as if he himself took this loan.
How are Bank Credits Classified?
Depending on the term of lending, bank loans are classified into:
- short-term (up to 1 year);
- medium-term (from 1 year to 3 years);
- Long-term (over 3 years).
Such a classification is conditional. For example, in the domestic practice, due to the instability of the economic situation, two categories of loans are allocated: short-term (up to 1 year) and long-term (over 1 year). At the same time, in advanced economies, medium-term loans include loans granted for up to 5-7 years, and in some cases-up to 10 years.
As a rule, short-term loans are provided to legal entities for replenishment of current assets and individuals for current expenses, while medium- and long-term loans are used to make investment expenditures (purchase of equipment, construction of buildings, etc.) and purchase of durable goods by private persons (auto loans, mortgages, etc.). In the category of short-term loans, it is possible to allocate an ultra-short-term overnight credit.
If you need money for several years and have a good credit history, then you should try your luck in the bank as payday loans are aimed at emergency situations’ help till the payday.
Payday Loans Online: No Collateral, No Guarantor, No Credit History Concerns
The specifics of online lending:
- high speed of customer service. The entire procedure – from activation of a personal cabinet and filling out an application for a loan before transferring money to a card account – takes from 15 to 30 minutes;
- flexible credit policy for borrowers: minimum requirements, low risks of failure, loyalty program for regular customers;
- Automatic system of cooperation in a remote mode, providing round-the-clock access to financial assistance. You can use the services of internet borrowing at any time;
- Possibility of remote registration and repayment of obligations without participation of credit service employees.
To take advantage of online credit services, it is enough to have access to the internet and go to the payday lender’s website, through which the loan is processed. In the application for a loan, you must provide passport data, details about the sources and amount of income, information on the loan and additional details about the borrower.
What Do Payday Loan Lenders Offer?
The services of lenders that issue urgent loans to a bank account are becoming increasingly popular and are seen as an affordable alternative to other ways to borrow money. Borrowers establish cooperation with the lender through the Internet. There is no need to apply to the bank, where you need a documentary report on the financial situation, the existence of an impeccable credit history is also not required. The credit online is provided after you have shared the passport details. In emergency situations it allows you to quickly get the necessary money for personal needs.
Standard conditions for the provision of financial assistance include:
- a small limit of funds, the size of which increases as the rating is accumulated (from 100$ to 1500$);
- the repayment period of the loan is usually a couple of weeks or maximum 30 days. Sometimes an online loan is issued for a longer period, but not more than a year;
- the interest rate can float and vary depending on the lender, as well as the status of a specific borrower.
A reliable credit company is ready to provide customers with personal data protection and a high level of service.
Which Risks May You Face Borrowing from Bank or a Payday Lender?
When getting fast money, you face several risks:
- You need to be very careful not to accept an offer to get a short-term loan from a fraudster. To avoid scammers, check out all information thoroughly.
- You may face unwanted consequences in case you repay the loan with a delay. The lender may sell your debt to the collector’s agency and you risk losing your property if you can’t pay the loan back on the due date. However, this won’t happen if you have rearranged the repayment plan.
When getting credits from a bank, you also risk losing something of value as in most cases a large amount of money is given to those who can provide a bank lender with the collateral. This means that each type of borrowing may result in negative consequences only if you don’t have a responsible attitude and don’t pay the loan back on the due date.
How to Choose the Reliable Payday Advance Lender?
Remember that despite the fact that payday lenders work online, they must meet all requirements. If you aren’t attentive, you will risk meeting an unreliable lender, which may lead to some unwanted consequences that may be easily be avoided. Take borrowing online seriously, in spite of its simplicity. Check out the trustworthiness of your potential lender by reading the reviews on the internet. If the company isn’t new, it will be not difficult to find the reviews of their customers as satisfied clients always leave some feedback.
One thing you should definitely do is to check out how their customer support service works by calling and asking any questions you are interested in. Get acquainted with the Private policy and the terms of credit line use. Don’t forget to check if the site contains all necessary information about their lending services online and make sure that there are no hidden fees.