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Monday, May 11, 2009

Payday Loan Or Personal Loan - What's the Difference?

The biggest difference between a payday loan and a personal loan is collateral. A personal loan at a bank usually requires collateral, like a house or car, anything of value really, be put up for the value of the loan. If the loan is defaulted, the bank takes possession of the collateral to recoup its money.

For many consumers, cash advance loans are a viable resource when they are facing short-term economic hardship. Unexpected expenses like car repair or doctor bills sometimes force someone into a situation where they must borrow in order to pay for essentials like gas, groceries and utilities. Typically, the loan will be sought out when the customer's budget has been stretched to its limit.

For those who use cash advance loans, sometimes referred to as "payday loans," responsibly, the loan is a source of cash to get them through till their next payday. They pay the loan off on the agreed-upon date and go on about their lives. Some roll-over the loan, paying fees and part of the principal, then pay off the remainder on their next payday.

Most charge a fee of $15-30 per $100 borrowed. This type of loan is not designed to be a long-term loan. Fees are assessed again on the remainder if the loan is not paid in full.

The online loan industry is still very young and most business is done on the Internet, which means a lot of software, computers and IT professionals to keep them running. Innovation and research and development eat up a lot of revenue. Loan companies try to keep the information clear and process simple, borrowers still have a lot of questions, so the company employs a full staff of knowledgeable and experienced Customer Service Representatives.

Most companies in the industry have streamlined the process and the loan application can be completed by the borrower in just a few minutes. Approval of the loan just takes a few seconds. Once the customer gives the go-ahead, the money is transferred to his account via secure bank transaction in as little as one business day. Keep in mind, too, that when a bank or credit union loans money there is usually collateral involved. An online loan is a personal loan with no collateral. Because some try to take advantage of this rather anonymous process, most companies require the use of a staff of collection agents.

The online loan industry provides a service necessary to many consumers. Reputable lending companies treat their customers with respect, protect their information and help them in their time of need.


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