As you probably know by now, making ends meet can be a tad difficult especially with the high costs of living, shaky job market and squeezing of incomes. Lower income earners therefore, find themselves in a difficult spot. They live from pay check to pay check and any financial emergency leaves them greatly exposed. So what do they do in such circumstances? They resort to same day loans to get access to small amounts of money needed to repair a car, a garage door, fix a leaking roof or simply pay off a bill that can’t wait. Ever wondered how different same day loans are from traditional bank loans? If you answered yes, you’ve come to the right place as we are just about to shed light on the differences so you can best make an informed decision.
No credit checks
Ordinarily, banks run credit checks before your loan application can be approved. The purpose of the credit check is also to help banks determine how much they will charge you for a particular loan. The same cannot be said of same day loans. In essence, same day loan lenders do not put much emphasis on a person’s credit score but rather approve loans based on a person’s income. So long as you meet the basic requirements, you do not need to have good credit to qualify.
Smaller amounts and shorter terms
Same day loans allow you to loan smaller amounts usually not more than 1000 pounds. This amount of money is generally expected to be repaid on the next payday and this essentially means that most same day loans last for 2-4 weeks after which the borrower will need their money. As compared to bank loans, the amount advanced by same day loan lenders is relatively small and the period relatively short.
The fact of the matter is, the interest rate charged on the amount you borrow from a bank is largely dependent on your credit rating. What this simply means is that the higher your credit rating, the lower the interest on your loan. The same cannot be said of same day loans that are known for charging astronomical interest rates hence making this type of loan dangerously expensive especially to low income earners.
It should be noted that bank loans are required to be paid in instalments. For instance, if you borrow say 3000 pounds for a period of one year, you will repay a determined amount of money on a monthly basis until you clear the loan together with the interest. With same day loans, there are no instalments as the money owed to the lender usually matures within 2 weeks and automatically is deducted from the borrower’s accounts.
Automatic deduction or repayment
One of the things you do when taking out a same day loan is that you sign a document giving the lender the power to automatically deduct the money owed together with interest from your bank account. The lender, therefore, has the permission to automatically deduct the balance from your bank account or cash the check you wrote to them without having to notify you on the day the loan matures. With traditional bank loans, that is not the case. If you default on a number of occasions or you are unable to repay, the bank usually confiscates your collateral.
Renewal is a walk in the park
If there is something interesting about same day loans, it has to be the fact that renewing the loan is quite easy. If you feel that you won’t be able to repay the loan as initially agreed, you can always approach your lender for renewal of the same. However, the downside is that you end up paying exorbitant fees and if you are not careful, you might actually find yourself deeper into debt.