Payday loan: how does it work!

Do you want to redo your interior? Buy a scooter? To go on holiday? Or put solar panels on the roof of your house?
The payday loan can be the solution to realize your desires since it adapts to all the projects.

What are the characteristics of the payday loan? How does it work? What information must the lender provide you?

Payday loan: what is it?

Personal loan: what is it?

The payday loan is a consumer loan that can be used to finance the project of your choice, unlike the credit affected: purchase of a car, leisure financing, a trip, work completion, need for one-time cash, etc..

You spend the loaned sum as you wish, without having to provide proof of its use to the lending institution.

You can take out a payday loan from banks, some insurance companies, a brokerage firm, a supermarket, or an online financial institution.

How the payday loan works

How the personal loan works

With a payday loan, you can borrow up to € 75,000. Its repayment duration is at least 3 months. The maximum duration, meanwhile, is around 7 years, but this can vary depending on the lenders and your ability to repay.

The lending institution may freely set the rate of the payday loan granted, without however exceeding the rate of wear. There are rates ranging from 2.5 to 10% depending on the offer.

To note :

Remember to ask if there are any fees added to the cost of credit.

The conditions for obtaining the loan differ from one institution to another:

  • A study of your solvency will be made to judge your ability to repay: evaluation of your sources of income, debt ratio, financial behavior, etc.
  • Although borrower insurance is not a legal requirement, it is still highly recommended. In addition, the lending institution may require the purchase of insurance to give you the credit. The choice of insurance is totally free. You do not have to take the insurance offered by the lender.

Repayment of the payday loan

Repayment of the personal loan

As long as you have not signed the loan agreement, you can not be asked to start paying the monthly payments.

The reimbursement will begin after the respect of a period of 14 calendar days of reflection after the signature of the offer of credit, and the entry into possession of the sums paid.

To note

you have difficulty repaying your payday loan? Ask the lender if it is possible to have a deadline extension. The extension of due date corresponds to a delay in the date of payment of your monthly payment.

It is possible to repay a payday loan in advance:

  • Check the potential amount of prepayment penalties in the terms and conditions of your loan contract. In principle, if your refund does not exceed € 10,000 over 1 year, there are no penalties associated.
  • Do the math : Is it financially worthwhile to repay the loan now if there are penalties? For this operation to be profitable to you, the penalties must not be higher than the remaining interest due.

Payday loan: what regulation?

Personal loan: what regulation?

To protect the borrowers, the State imposes a duty of information on the part of the lending institutions. Thus, before signing a payday loan offer, they must provide the following information to subscribers:

  • the identity and contact details of the lending institution;
  • the type of credit contracted, as well as its amount and the conditions for making the funds available;
  • the repayment term, with details of the maturities;
  • the total amount due, including the details of the fees;
  • the APR (annual percentage rate of charge) of the loan;
  • details of the compensation due in the event of late repayment;
  • the information surrounding the contractual withdrawal period.