All you need to know about payday loan
Payday loan (or credit) is a contract between a borrower and a credit institution. It makes available to the borrower a certain amount of money that will have to be repaid over a defined period (from a few months to a maximum of 5 years). This credit helps finance large projects on a budget, which a borrower can not or will not finance with its savings.
Payday loan: for whom, for what?
The Payday loan can be used without having a defined project: the borrower does not need to justify his request.
It can take different forms, such as: personal auto credits (to finance a vehicle, car, motorcycle, camper), leisure (travel, computer equipment, etc.), cash (financing unforeseen expenses due to cash shortage) ) or for work (construction or development of a main dwelling).
The Payday loan may be accessible to all persons not registered in the Payday loan Reimbursement Incident File (FICP), at the Banque de France.
Banks and credit institutions must also study the borrower’s debt ratio. If this debt ratio is greater than 33%, it will be almost impossible for the borrower to obtain a personal loan. Indeed, its repayment capacity will not be high enough; he will be considered a “risky borrower”.
Interest rate of Payday loan
The interest rate of a Payday loan varies according to the credit organizations and according to the banks. Generally, it is between 2.5% and 10%. It is lower when the repayment term is shorter, because the duration of the loan is then shorter. Conversely, interest rates rise when the repayment period is longer, because there is more overall monthly repayments. In this case, the cost of credit will be higher.
The interest rate of the personal loan is fixed in time, according to the chosen repayment period.
The regulation of Payday loan
The personal loan can reach an amount of 75 000 $, and its repayment period must be between 3 months and 5 years.
According to the law, it is legal to advertise a Payday loan, but the APR must be clearly stated. It must include the cost of the credit in total, ie the interest rates with associated fees.
The Lagarde law also protects the borrower: it asks the credit agency to establish a clear and framed contract.
Finally, the borrower has a cooling off period, from 7 to 14 business days since 1 May 2011: once the contract is signed, the borrower has 14 days to change your mind and cancel the deed borrowing, without justification.
The personal loan allows the borrower to benefit from a return of money without having to justify his project.
Before subscribing to a Payday loan, one has to compare the offers of the credit organizations according to the projects. According to the banks, packages can be proposed and more adapted to a particular project.