Line of credit or payday loan?


Less known than the payday loan, the line of credit also makes it possible to have a sum of money in order to finance projects. But these two solutions differ both in terms of repayment conditions and in terms of interest levels. See for details

How the payday loan works?

How the personal loan works?

Well known for a long time, the payday loan is an interesting solution when you want to have a sum of money quickly in order to finance a project, regardless of the project in question. Its operation corresponds to that of any credit since obtaining a sum of money by a bank or an organization triggers the process of repaying the credit.

In principle, repayment is made monthly by monthly installments which include part of the borrowed capital, to which is added part of the interest due to the bank and which represents the cost of credit. These interests generally vary between 3% and 10%.

The advantage of the payday loan is that the borrower repays a fixed sum throughout his credit. There are therefore no unpleasant surprises to fear with this type of credit. In addition, the payday loan is relatively easy to obtain compared to the line of credit since the conditions of income are generally less demanding.

Functioning and interest of the line of credit

Functioning and interest of the line of credit

The line of credit belongs to the family of revolving loans. Once the line of credit has been granted, the borrower has cash which he can use if necessary. The main feature of the line of credit is that it only pays interest on the part of the capital that has been spent.

Conversely, this means that the borrower will pay no interest if he does not use the money available in his line of credit. However, be aware that interest rates are generally high under lines of credit. The main advantage of the line of credit is that it offers real cash security in the event of unexpected expenses. However, this solution is aimed at people with significant income to avoid the risks of over-indebtedness. In addition, its ease of use poses a risk in the event of mismanagement.

Finally, the absence of interest repayment in the event of non-use of cash does not mean that nothing is repaid: the borrower who does not use his line of credit will still have to repay at least 2% of the credit balance each month.

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