What is a payday loan ?
The popularity of credit is due to its flexibility, generally smaller sums which are more easily granted than other types.
Unlike other loans, such as real estate or leasing, in the case of a payday loan, the client does not have to justify how he uses the money, nor is he required any evidence to prove this.
Due to versatility, the term includes many types of loans that do not fit into the classical patterns and there may be very variations in terms of lending and borrowing amounts.
Although originally thought to be a short-term, low-value product for current spending, the popularity of personal need credit has led to a permanent increase in the maximum cap and reimbursement period. Because of the more sophisticated requirements, these credits have also been used for other purposes (for real estate investments, for example), becoming a viable alternative to all other credit products. Paradoxically, the higher interest rates on payday loans do not matter much in the minds of Romanians, who often focus only on how simple the conditions are to be met to receive the money.
Payday loans can be contracted from both classic banks and non-bank financial institutions. Although banks are clearly dominating the sector at this time, and are often the better solution, there are cases where it is more convenient and convenient to call for payday loan.
Interest on payday loans
Payday loans are in terms of cost and interest somewhere in the middle between fast and classic loans.
Because there is a very diverse range of products of this type, the interest also varies greatly and depends on the amount and the repayment period.
In the case of banks, the annual interest rate starts at 6% in the most advantageous cases but can also reach up to 17% per year. For example, the interest rate on a payday loan from 6.3% per year and at it reaches 9.25% per year.
It is important to be mindful of two aspects. In general, the most favorable interest rates for banks are only valid under certain very restrictive conditions. For example, to get personal credit from 9.25% interest, it is necessary to get the salary into a current account with them and to make a life insurance with the bank. Few of those applying for credits meet this kind of conditions, so the real interest rate is usually higher.
There is also the option to request a payday loan from a non-bank financial institution. In this case, the interest rate will be much higher, but there are important advantages, which we will present below. Annual effective interest rate will be over 100% and may reach 400%, but the credit usually has a much shorter duration.
Terms and periods of reimbursement of payday loans
The value of a payday loan from a bank can vary a lot. Initially, the value of a loan was somewhere between 3 and 6 average salaries in the economy but this ceiling has been steadily increasing in recent years. Banks now have products available in both EUR or other currencies, the maximum being somewhere around 90000 or 20000 EUR.
The minimum amount of a payday loan from the bank starts at 1000 RON but is usually between 2000 and 5000 RON. Some banks offer fixed-term and fixed-value products, such as a 10000 RON credit from .
The repayment period may be fixed (as in the product to be returned in 5 years) or at the customer’s choice. As a rule, the duration of payday loans from banks is between 6 months and 5 years, although there are exceptions.
Conditions to Get a payday loan
From the point of view of the conditions, the amount you need is important, in the case of large loans there are quite restrictive rules.
Some basic conditions common to all credits are: Romanian citizenship, the minimum age of 18 (reached 25 years in some banks) and the maximum age (generally between 65 and 75 years at the end of the reimbursement period). Of course, you must have a valid identity card (or old identity card). Another mandatory condition is to be able to prove that you have a permanent income of any kind (pensions, salaries, rents, dividends, copyrights, etc.). Banks also make a check at the Credit Bureau and will refuse if you are a bad payer or you have too many other ongoing loans. Attention, some banks may make exceptions under certain conditions.
Some banks also have other requirements: to agree to be checked in the database, to have a minimum monthly income (can reach 1000 or 1500 RON), to get a salary certificate, to have a minimum seniority in work at the current employer, etc. In addition, guarantees or guarantees are required for large loans.
Non-bank financial institutions have much lighter conditions. It is just enough to have a valid identity card and to prove through a statement that you have a stable income so that you can return your credit. Most s will not deny you even if you have any other debt or you are on the black list of the Credit Bureau.
Advantages of payday loans
- Simplified procedure. The main reason why they have become so popular with us in the country is easy approval without the need for too many acts.
- No advance. For other types of credit, you also need to contribute a percentage of the amount from the beginning.
- The bids are very varied and cover virtually any amount and period you may need.
- No warranties are required. Except for the maximum amounts, you do not have to pledge the house or other valuable property to guarantee the loan.
- Spend money as you like. It does not have to specify a specific purpose, nor to bring bills or other proofs later.
- Quick approval. Non-bank financial institutions send your money in a few hours, but even banks are moving fast enough.
- Wide range of eligible income. Most of the time, you do not have to be an employee to get a credit.
- Favorable offers. Many banks offer a grace period for reimbursement or the possibility of making a break of several months in paying rates.
- Transparency. Clauses are much simpler than other types of loans, the risk of later waking up with hidden costs is lower.
- Most s give you an online credit, but many banks now have this option available.
For what purpose are payday loans used?
As the name calls it, payday loan is for your needs and you can use it to finance any type of expense. What you do with money is your personal problem.
Sometimes amounts are used to respond to unpleasant events (medical problems, accidents, lack of money in the company, death) or pleasant (anniversaries, investments or other opportunities) of life. The main goal remains consumption.
The most common uses of payday loans are: holiday expenses, house renovation, furniture acquisition, funding of studies abroad or in the country, medical or beauty treatments, the cover of unexpected expenses of any kind, the purchase of products electronics and appliances.
Frequently, payday loans are an alternative for other purposes when the client is not considered eligible for specialist credit. Money can be used for real estate investment, buying a car, financing a business, or even reimbursing another maturing credit. Basically, you can use the money you receive on absolutely whatever you want, without motivating with much detail.