Are Payday Loans Identical to Short-term Loans?

At times, the amount of money in the checking account is insufficient for the needs of the household. Credit cards and loans from friends are viable options for those with access to either option. A payday loan is designed to provide fast cash to the person who needs to find money without a credit check or collateral. On the next payday, the entire amount is repaid, and the borrower is free from the debt. Sometimes, the potential borrower will run across an advertisement for short-term loans and wonder if there is a difference. Some significant differences are noteworthy.

• Credit check – Payday loans do not require a credit check for the applicant. Short-term loans through traditional lenders will require a credit check to determine the repayment probability.
• Interest rate – A cash advance in Toronto will have a significant interest rate that will be charged for the days between approval and the next payday. Short-term loans offer different interest rates depending on the lender and the borrower’s credit score.
• Payments – Toronto payday loans are repaid in full on the next payday. Short-term loans offer monthly payments for a period less than one year.
• Renewal – Toronto payday loans cannot be renewed, but short-term loans can be renewed for another term.

Applicants will find that some websites use the two terms interchangeably. Questions should be asked about the terms of the loan. Some payday loan providers will allow the loans to be renewed, but that can be dangerous for the borrower. Multiple outstanding payday loans can cause significant hardship for the borrower. Correcting the cash flow issue is better than using a payday loan for each shortfall. Anyone with a continuous monthly shortage of funds should consider eliminating some expenses and increasing the household income. Significant adjustments should be made to prevent the need for a payday loan.

People who need a cash advance in Toronto will be asked to provide proof of employment and a voided check. The applicant will complete the online application. Lenders will respond if the application meets the lender’s qualifications. Once the loan is approved, the funds will be transferred to the borrower’s checking account. On the next payday, the entire loan balance is withdrawn from the checking account. A payday loan is designed to fill an immediate need for a brief period of time. The wise borrower will repay the loan and resume the normal routine of life.

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