Generally a loan system consist of a considerable principal amount, normal rate of interest, and high duration of repayment. The banks will follow a thorough procedure of assessing the borrower’s credit score along with collateral issues. The banks take care of security against the loan in form of mortgages, guarantor or hypothecations, etc. But there is an alternate type of loans which will be granted without any security, the payday loan system.
The Payday Loans
The terms and conditions of such a loan, varies from location and the service you are availing. Standard features of a payday loan are;
- This type of loan usually has small principal amount, which often has restrictions imposed by government.
- The banks or lenders might have no security of the loan , but generally the lenders will demand a postdated check of full amount, which will be cashed at the due date.
- The due date is set typically within a month. The tenure of the loan is usually set at the next salary or payment of the borrower, hence the name “Payday Loan”.
- The rate of interest levied on this loan, is very high, since there is minimum security for the lenders in this case.
- Many of the banks and lenders, also demand the loan to be repayment in single transaction with whole lump – sum amount all together. They do not provide options for installments.
The rates of interest might range from 12 percent per annum to over 30 percent. The loans are available from small amount of 10 dollars as well.
How to apply for such loans?
Several banks have standard procedure for applying for these loans. A simple form and security check at branch office of your bank. With the advancements in technology, you can also apply for these loans online. There are several third party lenders, who have setup their online portal, and a simple registration process. You need to provide your basic information, bank details and complete some additional formalities for security purposes, and you will be granted the loan easily.