difference between payday advances and payday loans
Payday loan is a popular term for a small but lucrative business: Payday Advance. Payday Loan is a type of short-term loans given to borrowers with a checking account or credit card and the intention of making the payment on his next pay day. It is a quick and easy way to get fast cash for urgent needs. But it is important to understand the difference between payday advances and payday loans.
Payday Advance: A payday loan business offers cash advances of a fixed interest rate or variable interest rates over a specified period. Payday advance businesses offer the convenience of a convenient online application form along with the option of submitting documents, banking statements, and pay stubs electronically. Borrowers can get money within one hour from the date of application. Payday loans are non-revolvable monies offered by payday loan businesses to borrowers who don’t qualify for other lending options and have no immediate need for additional funds. Payday advances are short term cash loans obtained by borrowers on the basis of their paycheck or on their next pay day. Payday advance lenders usually don’t require any formal account opening process, minimal credit check, or collateral or advanced repayment arrangements.
There are several factors to be considered before you take out a payday loan. The interest rates vary among different lenders and are usually expressed as a percentage rate over the term of the borrowing. This rate is usually included in the APR or annual percentage rate and is determined by taking the annual income of the loan and the annual percentage rate charged on similar items by other financial institutions. The charges may be in a single lump sum, a line of credit, a debit card or they may be calculated on a daily, weekly or monthly basis.
Credit Checks: Because payday loans aren’t traditionally considered as an asset that would earn interest, many people have trouble qualifying for traditional bank loans. Since many people borrow from payday lenders in order to meet immediate expenses, they aren’t typically considered part of a line of credit that earns regular interest. This means that potential customers must rely on their own financial abilities and their own good credit history to ensure the success of their borrowing.
Credit Union Access
Many payday loan companies operate through credit unions or other third-party financial organizations. Because these groups generally require a higher credit line than conventional banks, borrowers may be able to obtain more favorable terms or even secure better interest rates with credit cards than with a conventional lender. The availability of a line of credit with a credit union is particularly helpful for those who already have a line of credit established with a bank. In most cases, credit unions offer better interest rates and longer payback terms than do traditional lenders.
As you can see, there are several benefits to borrowing from a credit union, including interest rates that are often much better than the competition. Payday Loans frequently has similar interest rate structures, due to credit unions offering the loans at lower cost than they would to individual lenders. However, in some cases borrowers may find that these lenders are not as financially responsible as they might be. If you are considering a cash advance loan to help cover an unexpected expense, it’s important to ensure that you understand the terms of the repayment plan. In particular, it’s crucial that you know how much the APR will be for the loan and if there are any hidden fees involved, such as transaction fees or the annual service fee. While the interest rate may be significantly lower than what you would pay for a payday loan from a traditional lender, you still want to make sure that you are getting a truly low interest rate on your cash advance loan.