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Comparison: Traditional vs. Payday Loans

There are many pluses and minus of every type of loan but now that the use of the Payday loan is widespread it is sometimes useful to consider carefully the differences inherent to each type of loan. In this piece it is hoped you will receive a better understanding of the similarities and differences in a payday type loan compared with a traditional bank loan as well as with other types of loans.

Sometimes when the need arise and your family or personal relationships are strong a personal loan can be requested. Typically an unsecured loan meaning you don't pledge any collateral to your friend or relative to receive this type of loan. To put it another way the loan is not linked to any pledge of property or funds for repayment. This of course increases the risk to your lender be that a friend or relative or in some cases a traditional bank. The problem is of course if you were to default on such a type a loan to a bank and become insolvent and file for bankruptcy there is very little the bank can do to recover their money. In some instances if a home equity loan is provided against your property or like a car loan there is some type of recourse to recover for the lending institution which diminishes the threat of complete non-recovery.

You can often hear people say that they want a personal loan but they are looking for rates that are in line with what an 18 month CD would earn. That just is not practical and given the current market most banks no longer offer personal loans. The banks that do offer personal loans make it difficult to qualify and often cap the amount you can borrow. Finally is it possible for you to procure a personal loan? Without tapping rich uncle Ned it very well could become a problem for you and you might need to become rather imaginative. You also can't think that simply because your credit score is 725 you can get a loan without problems and you also can't think that simply because your credit score is 620 that you will have the door slammed in your face when trying to get a loan.

Before you attempt to get a traditional personal loan you had better get a full copy of your credit report including a review of accounts and public records. You should have any errors eliminated. You also had better pay any outstanding debts that remain and try to get a letter of agreement to eliminate the account from debt. You should verify if any late payments that were reported were filed by mistake and get those purged from your report. You can be astonished as to the degree your rating can move up by clearing up what seem to be minutia.

Now as you can see this can be a very time consuming and nerve racking process especially when dealing with the big three credit agencies. The issue is how long can you wait for you money if you have an emergency. Almost all payday loans and your ability to procure such loans are not based on your credit score. They are based on your ability to repay and confirmation of regular employment. Furthermore, there are of course some additional minor requirements such as being of sound mind and eighteen years old and having an operating bank account. As you can see these things are minor compared to the traditional unsecured loan from a bank. Not only this but the pay out of the funds is usually within 24 hours.