While they both provide loans, there are differences between conventional banks and payday loan lenders. Understanding those differences can help understand why the rules and regulations, as well as the terms vary between the two. There are positives and negatives when it comes to any lender, so knowing the difference can help to decide which is best under certain circumstances.
Application Time
With a traditional bank, the time between the application and acceptance (or denial) can be a long one. There are many different channels through which an application must progress in a bank before a decision is made. With Payday Loan Lenders, the application process is very easy, and the turnaround time to receive money is a matter of minutes, or a few hours at the most. This is because the Payday institution actually has many lenders ready to provide the loans. Since there are so many, finding one that is a good match for your needs is a lot easier and quicker.
Paperwork and Proof
Conventional banks require a lot of paperwork when someone applies for a loan. Employment, debt, and other factors must be proven before the loan process can even begin. Applicants must make copies of all of the proof and provide it to the banks when making application for loans. Payday loan lenders usually require proof of income, but there is not a lot of paperwork and copies to be turned in.
Convenience
Banks are open an average of 7 hours a day, 5 days a week. Payday loan lenders have more convenient hours which makes applying easier. Many people want to apply after work or on the weekends, which is not possible with a traditional bank. More hours of operation mean more convenience for the customer. Many instant loan operations are open extended hours and they have many offices from which to serve their customers.
Interest Rates
Banks now have different interest rates depending on the applicant's credit rating. This is a change from even a few short years ago when anyone with less than perfect credit could not get any type of loan. Payday loan lenders have one interest rate which applies to all applicants. Because the loans are short term, and provided with even a more lax credit policy than the banks, it may be higher than a standard bank loan.
Credit Rating
Banks may have gotten a little more lenient when it comes to credit scores, but those with poor credit still have a very small chance of getting a loan. Payday loan lenders offer more flexibility and are able to provide loans even to those with bad credit. Since they are short-term loans, they are able to accept lower credit ratings with the understanding that the loan payment will come straight out of the applicant's bank account in the time specified.
Banks still are preferred for certain types of loans, such as home or car loans. For those who need cash in a hurry, and are willing to repay the loan in a short amount of time, payday loan lenders offer more convenience and options. Always read the agreement carefully before signing any loan agreement.
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