Loans & Credit

Why Resort To Payday Loan

Payday Loan
Written by Gashik

Today, many banks in Mississauga offer their customers the opportunity to use such a service as a payday loan.

This offer is especially relevant in cases when you need to make a bargain purchase, but currently lacking money, because a few days or a week is remaining to your payday.

The advantage of this system is that a customer has to submit a few documents and the procedure of approval is fast and simple enough. In addition, the receipt of funds does not affect the credit history of the borrower.

How it All Works

A customer gets the money according to the following scheme: you make a purchase, paying with your bank card.

If you do not have enough funds, they are automatically added by the bank.

Once you received the wages, that sum (with a certain interest), which the bank has borrowed you is debited from the bank card – and that is all the loan is repaid.

Note that different banks take a certain percentage for issuing a payday loan, but usually it makes up 15-24% of the amount you have borrowed.

In this case, the maximum possible amount of the loan would not exceed 50% of your monthly income on the card.

The Documents Required

For this type of loan, the borrower will need to provide the bank the following documents: a questionnaire, the income statement, and a passport.

In addition, most banks and financial institutions in Mississauga are willing to provide money to the borrower in accordance with the terms of payday when the average monthly income is 1200 US $ at least.

And if the borrower is a customer of the bank for three months at least.

It is also worth noting that you can get such a loan in a store, where goods are purchased, as well as over the phone or online on the websites of companies offering such lending programs.

In this case, it is possible to submit an application by fax or online.

Pros and Cons of Payday Loan

Besides obvious advantages, this type of lending has some drawbacks, and it belongs to the risky type of loan.

So, if a borrower is experiencing financial difficulties, the need to return the loan may have a negative impact on its overall financial position as it will take a significant part of a salary as a repayment.

And if the borrower is constantly resorting to this method of obtaining additional funds, then it may lead to complete insolvency and bankruptcy.

Another drawback is that the interest rate on such a loan can be several times higher than the usual rate for consumer loans.

You also need to pay attention to the fact that some banks may automatically renew credit after its maturity, so you should carefully study the terms of the contract before signing it.

In this regard, it is recommended to consider carefully whether it is necessary to make a purchase at the moment or it is more rational to postpone it until a later date.

Also Read:-  Personal loan Vs Credit Card

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.