What is a personal payday loan?
Know the advantages and disadvantages of personal payday loans
A personal payday loan is a financial product, granted by a banking institution to a client when making a request and meeting the requested requirements. After the loan term stipulated in the contract is fulfilled, the client must pay the bank, the loan amount, plus an interest, also stipulated in the contract. Otherwise, the banking institution will increase interest on a daily basis, and notify Credit Checker and History, leaving a mark on your credit history.
The monthly amount of interest will depend on 3 elements:
- 1. Loan capital
- 2. Temporary loan (how long do you want to pay)
- 3. Loan interest rate
The longer the term, the lower the monthly interest, but the greater the total amount to be paid.
Characteristics of a personal payday loan
- The loan can be granted to anyone, as long as the loan application is made, and it is approved.
- The client’s use of the loan is free
- The interest may vary, be fixed, or be mixed, depending on the contract and the characteristics of the lender
- Depending on the granting institution and the amount of the loan, goods may or may not be requested as collateral.
Interest rates for personal payday loans
The interest is the price that the granting institution (the lender) charges for lending this money. In other words, it is the price of the service, and the profit that the lender will obtain by lending the money. The interest varies according to many factors, and can be daily, weekly, monthly or annual.
It is the one that always maintains the same characteristics during the time that the loan is valid. That is, if I have a fixed interest of 4%, it cannot go up or down during the life of the loan.
It is the one that is subject to change, in this model, the client can benefit if the interest rate falls, or can be affected, if the rate goes up. The fact that it goes up or down is determined every year based on the benchmark index presented by the Bank of the Republic.
It is the one that combines fixed interest with variable interest. It is generally for loans with large terms and amounts. A fixed interest rate is applied during the first years, and over time, the interest will change based on the benchmark.
Temporality of loans
It is the time you choose to pay the loan, and it will depend on the agreement you reach with the granting institution or the lender. Generally, the larger the loan amount, the longer the term. However, there are times when the loan can be high, and the term short.
They are those that go from some days, up to 24 months. They are usually easy to obtain loans, since the amount is usually smaller. It is not necessary to present a guarantee regularly. The guarantee that lenders have, are the characteristics of the user, such as monthly income.
They are those that go from 1 to 5 years. The amount in this case is usually greater than the short-term loan. Lenders can ask the user to present a guarantee or a guarantee, in order to ensure that they will not lose the money borrowed.
They are those that go from 5 to 15 years or more. They are generally loans with high amounts, such as mortgage loans. Lenders request a guarantee or guarantee with forced characteristics, such as a property with a certain commercial value.
It is the instrument that serves the lenders to proceed legally, in case the client fails to comply with the payments stipulated in the contract. In the case of small loans, the guarantee of reporting to the credit bureau is generally used, which would complicate the client in future applications. In the case of major loans, lenders can legally proceed with the guarantees presented by the user.
Requirements to apply for a personal payday loan
When requesting a loan, the lender will review the characteristics of the user, in order to know their ability to pay, that is, they will check if the applicant is able to pay the loan with their income, as well as if their credit history speaks of people who They have previously paid.
The documents that lenders usually require are the following:
- Official identification: IFE or INE, valid passport or birth certificate.
- Proof of address.
- Proof of income (sometimes).
- Guarantees (car invoice, deeds of a property, etc.).
- Personal references.
- Employer Letters
It is important to mention that the documentation will depend on the agreement reached with the lender. Generally, for small personal payday loans, the process is very fast and the documentation is minimal.
It is the way in which both the client and the lender undertake to comply with the characteristics of the loans. Almost always, it is through a contract, in which both sign, so that both parties have a legal document that proves that they agreed with the characteristics of the loan. Generally, when it comes to small loans, the contract is signed digitally, in order to expedite the process, and so that the client does not have to move to a branch. For these cases, the client must have a debit bank card, so that the lender can deposit the money to the account.
They are the different ways in which lenders offer their products, and will depend on the characteristics of the loans offered. Here are the most common ways:
They are easy and quick to obtain, generally the amount does not exceed 5 thousand pesos. Those who usually grant these loans are common financial, and only basic documents and references are requested.
They are easy and quick to obtain, and in addition, the user must not physically appear at a branch, because the whole process is online. The amounts do not usually exceed 10 thousand pesos, and the required documentation will be minimal, presenting photographs of IFE or INE, and authorizing the institution to review the credit history, which is the only guarantee that lenders have.
They are the most common, they are made in a physical branch of the bank. The user must request it from a specialized executive, and the guarantees will depend on the amount of the loan, which varies from 10 thousand to millions of pesos, history and average balance of the user.
It is much easier to obtain one of these loans when the user has a bank account with this institution.
They are usually used by people who have one or more negative brands in their credit history, so they are no longer able to obtain financial instruments with a formal institution. These lenders are individuals, and they are not regulated. In fact, they are not completely legal, and usually have a lot of risk, since lenders generally request deposits, and then do not grant the loan, arguing that they do not have the characteristics. Or they just disappear.
Recommendations when acquiring a personal payday loan
- Define very well the use that you will give to the loan, and if you are able to pay in the agreed term and amount. Since in case of not paying, your credit history will be affected, and then it will be more complicated to acquire financial products.
- Investigate that the granting institution is reliable and regulated, in order to avoid fraud. Remember that at Ranger Loan, we only work with serious, fair, real and regulated companies.
- Never sign a contract without first reading it completely, remember that it is there that all the conditions of the loan will be defined, and by reading it, you will be sure that you are committing to something you have in mind.