Are Banks Better Than Payday Loan Companies?

Payday loans from Banks are designed to help customers who have recurring deposits on their account.It is not intended for a large line of credit but it is viewed by the banks as a relationship product.

Most banks offer this feature as long as you pass the requirements such as having a checking account with them for more than 6 months and as long as the the direct deposits are automatically made into the account. A customer may get an advance of up to 50% of the amount that is regularly deposited into their account with a limit of $500 for an interest of 10% or a maximum of $50. If a customer regularly borrows for 6 months ,then they also have to go through a “cooling period” that shuts off the customer’s borrowing. The reason for this? Banks say that they they don’t want customers to be habitual borrowers and that it is only intended for emergency use by providing short term credit quickly. It is not intended for long-term financial needs.

The question is, are banks really a better source of payday loans? Note that while banks offer these loans to be paid out in a month or a few weeks, their policy is to pay themselves back during the first direct deposit of $100 or more. If a customer borrows $100 a week before payday, the amount of $110 is deducted immediately upon direct deposit which would be quite unfair given the fact that some people borrow for emergencies and instead of getting help, theyv’e just dug a deeper hole for themselves. A fee of 10% for only a few days? Certainly sounds like the equivalent of loan sharking by mobsters..In addition, banks can raise their fees as high as they want.

Payday loan companies on the other hand, offer short term loans that charge 20% or more for a few weeks. If you borrow $100 today then you pay back $120 or maybe more on payday.Payday loans are thriving in the US now with the most popular companies such as www.DollarsDirect.com.au , www.CityFinance.com.au , www.DebtRelief.com.au . While payday loans are safer than loan sharks, they certainly won’t break your legs but they can do much damage to your credit rating.

While you would think that payday loans seem to give a higher interest rate than banks, they could end up cheaper in the sense that with banks, if you bounce a check, there is a huge penalty and you can save up to 60 or 70% and there is also a $30 or more in late fees.

In comparison, BANKS:

Has a slow processing, may take 10 to 15 days.
Has tireless procedures: no appointments
Need an explanation for the loan
Have uncertainty even if you qualify
Bad credit rating affects the processing of loan
Have strict repayment schedules.
Provides lower interest than paydayday loans.

while PAYDAY  Loans:

You get instant approval if you qualify.
Are easy to get: just fill out the online form
.                       Asks no explanation for the loan.
Even people with bad credit can get a loan.
Repayment schedule can be changed.

Ultimately, only the borrower will decide if they will go to the bank or some lending institution to get a cash advance.Either way, the thing to keep in mind is to make a loan only during emergencies and not for any luxury.