What is the difference between a loan and a payday loan? The amount of cash loan and payday loans What is the debt repayment time? Loan and payday repayment procedure The cost of cash loans and payday loans How do you choose the best cash loan or payday loan?
The financial market today offers many solutions to obtain the cash needed to cover any expenditure. Although bank loans are still the most popular, more and more people are reaching for non-bank loans, commonly known as payday loans.
The advantage of loans is the possibility of borrowing a fairly large amount and spreading the repayment of liabilities into small installments.
This payday loan can be taken in a few minutes without unnecessary formalities, even if the GFI is not very good. But these are not the only differences between these products.
What is the difference between a loan and a payday loan?
To clarify the difference between credit and payday loans, it’s important to start with the most important naming issue and the legal basis of both products. It is worth remembering that:
- the loan is available only in banks and credit unions, and the rules for granting it are set out in the Banking Law,
- a payday loan is a colloquial term for a loan offered by non-bank institutions, and the rules for granting it are regulated by the Civil Code and the Consumer Credit Act.
The specific features of both products result from the abovementioned legal acts.
What is a bank cash loan?
Pursuant to the definition contained in the Banking Law, the bank undertakes to transfer to the borrower a certain amount of money for the purpose indicated by him, while the borrower undertakes to use the funds in accordance with the contract, as well as to return them within the prescribed period along with interest and commission.
In practice, cash loans are usually granted for any purpose. To obtain it, you must have adequate creditworthiness – the same act, i.e. the Banking Law, obliges banks to analyze and evaluate it.
What are the characteristics of the payday loan?
Good Finance is nothing but a loan, which in the Civil Code has been described as the transfer of a certain amount of money by the lender to the borrower and at the same time an obligation on the borrower to return it in the same amount. As you can see, the loan may or may not be increased by interest and commission.
It is also worth knowing that payday loans are usually understood to mean small loans with a one-off repayment date (e.g. up to 30 days) and not installment loans.
The amount of cash loan and payday loans
One of the most important differences between a loan and payday loan is the amount you can borrow with the help of individual products. The maximum amount of cash loans is usually Good Finance 200,000, while the minimum is rarely lower than Good Finance 1,000.
In turn, the maximum amount of payday loan granted for a period of up to 30 days is up to Good Finance 10,000, however, most companies offer such loans in the amount of no more than Good Finance 3,000-5,000.
The amount limits apply in particular to new clients who may apply for slightly lower amounts for the first time than persons regularly using the services of a given company.
The lowest amounts of payday loans are Good Finance 100. Slightly more cash can be borrowed using installment loans, up to Good Finance 60,000.
What is the debt repayment time? Loan and payday repayment procedure
The payback period is another important parameter that distinguishes bank loans from payday loans.
How far can we take out a cash loan?
Repayment of cash loan in installments can be from 3 to a maximum of 120 months, and thus even for 10 years.
How much time do we have to regulate payday loans?
In the case of the simplest online payday loans, the borrowed money should usually be returned within 30 days. The repayment of payday loans in installments looks slightly different – this type of loan can be spread over a period of 60 months, although repayment periods of 1 to 24 months can be found most often.
The cost of cash loans and payday loans
The definitions in the first paragraph of credit and loan show that the former always involves the necessity of incurring the costs of incurring an obligation. These costs usually include interest and commission. However, the loan can be increased by such costs, but it does not have to.
This difference can be seen in the offers because bank cash loans are never free, at most there are offers with a 0% commission or a lower interest rate. In turn, non-bank companies often offer payday loans for free, which must be returned in exactly the same amount as they were incurred.
However, such conditions are not standard, but only available as part of a promotion and usually for new customers. This means that after using them, the next loan in a given company is associated with the need to bear normal costs. Unfortunately, these are not the lowest – according to standard price lists, non-bank payday loans are much more expensive than bank cash loans.
This is clearly seen when comparing Real Annual Interest Rates of both types of products. The average APRC of loans is around 10%, while non-bank installment loans range from 20% to even 150%.
In what situations is the loan better suited and in which payday loan?
Are you wondering what is better, cash loan or payday loan? There is no definite answer to this question because both products have their advantages, but each of them responds to slightly different needs.
When is a cash loan better?
Select a bank offer if:
- you need a bigger amount
- you want to pay back the liability in small monthly installments, which means that the repayment period is longer,
- you have a good credit history at the Credit Information Bureau,
- you can document your income.
Before applying for a cash loan, check what conditions must be met to receive funding. The most important is having creditworthiness, i.e. solid income in an appropriate amount and good history in GFI.
When is the payday loan better?
The payday loan will be much more beneficial if:
- you want to get cash quickly and without unnecessary online formalities,
- you need a small amount of money,
- you care about quick repayment,
- you are interested in a loan from the APRC 0%,
- you want to take out a loan without earnings certificates,
- you don’t have a good credit history in GFI,
- Your bank application for a cash loan has been rejected.
And what conditions must be met to use the payday pay? It is usually enough to have an ID card and a bank account, as well as a financial situation that allows you to repay the liability.
Loan companies, however, are less scrupulous in analyzing creditworthiness, and many of them do not check databases such as GFI or BIG, which is why in many cases those in debt have a chance to get a loan.
How do you choose the best cash loan or payday loan?
The Internet is helpful in finding a favorable offer. It is on the network that you can use various tools for free to quickly compare loans and loans and choose the best product. Such loan rankings or payday loan comparison services allow them to get acquainted with current offers of banks and loan companies.
Remember to read the terms of the lender’s website carefully before using the offer.