There is a very big difference between short-term cash loans (and these are payday loans) and various types of loans. The completely different nature of the contract is mainly caused by the fact that loans are a multiple of the loan and are granted for a long period of time .
In addition, loans, unlike payday loans, are usually not granted for any purpose – it is formulated in the contract (e.g. a mortgage). Only banks can grant loans, while the fast internet loans market is dominated by non-banking entities, more specifically by loan companies (not to be confused with parabanks).
Who can get a loan and who can get a loan?
The procedure of receipt – verification is also different. With payday loans online, this mainly comes down to checking whether the person is in arrears with payments to other creditors.
Various registers of debtors are used for this purpose, which make up the system used by the companies providing payday loans to assess loan applications. The most popular registers are BIK, BIG, KRD. For non-bank online installment loans, permanent employment is usually necessary.
With a loan, it is not only history that matters – the bank thoroughly verifies the property and income situation of the person – it must be sure that it will receive the money back.
When negotiating loan terms, banks often want to secure a contract in the form of real estate or other assets. With micro-loans, there is no such procedure – the risk is included in the cost of such loans, and for people applying for payday loans it is primarily the time to receive money that counts.
Where does the popularity of payday loans come from?
By design, money from payday loans online is intended to help in “go-off situations” when cash is needed almost immediately . The profit of loan companies also comes from untimely customers, and in extreme cases debt recovery activities are already being undertaken.
Undoubtedly, payday loans and their benefits are important for a large part of borrowers, but there is nothing for free – borrowing in non-bank companies is generally clearly more expensive than in banks.