There are certain times when we may need money urgently for unforeseen events. And unless we have savings the most normal thing is to resort to solutions such as payday loans. However, not all credit institutions offer the same conditions when granting payday loans. That’s why the best solution to avoid mistakes is to use a financial comparator. But anyway and to decide the best loan it is important to know how to answer some of the most frequent questions:
What is a payday loan?
A payday loan or consumer loan is a financial product that is usually granted to individuals in exchange for a personal guarantee. Whether the beneficiary of the loan or a third party, in that case the personal guarantee is known as a guarantee. When we talk about personal guarantee means that the return of the loan is guaranteed as income and assets of a person. payday loan money is usually used to purchase consumer goods, such as televisions, appliances, computer equipment, travel, renovations, or even studies. The return period to pay the borrowed money plus the corresponding interest, will depend on the amount. Because for example for amounts between 100 and 300 euros we can talk about terms of 30 days. While for amounts of more than 12,000 euros we can talk about terms of 18 months or more. In order to pay back the borrowed money, periodic, normally fixed amounts called quotas will be established, which include a part in payment of the principal loaned plus the corresponding interest. So the interest rate, the amount of money borrowed, and the return period, will determine the total amount of the payment in concept of monthly installments.
How are the interests in payday loans?
The price paid for the money received in a payday loan is what is known as the interest rate, and is established as a percentage. The interest rates may vary depending on the entity, ie the interest rate for payday loans of Banco Santander is not the same as for SCIA or Cashlob. But there is something common for all entities, and they are the types of interest rates. We speak of a fixed or variable interest rate, depending on whether the interest rate varies or not depending on an index such as the EURIBOR or the IRPH. With the fixed interest rate, the percentage to be paid as interest on the borrowed money is agreed upon when the loan is granted and is maintained until its total return. While at the variable interest rate there are annual or semi-annual reviews, so the interest to be applied will depend on the value of the index at each review moment, to which a differential will be added to obtain the total interest rate to be applied on the payday loan.
What is the APR or equivalent annual rate?
They are the acronym of the Annual Effective Rate also known as the Annual Equivalent Rate. And its calculation is due to the fact that interest on a payday loan is usually calculated in the form of APR, that is, the interest rate in annual terms. Because this is a way of being able to compare the financial cost of different offers from financial entities. But the APR also includes other costs in addition to interest, such as commissions and certain expenses in order to calculate the real cost in annual terms of any loan or credit.
What is the maximum term of a payday loan?
The term to return a loan can vary a lot, for example the mortgages that are destined for the purchase of a house are usually the ones that offer the most term. However, payday loans that are used for personal purchases and consumption usually have a maximum of 3 years. Since having personal guarantee have a high risk. The problem that the term is small is that the monthly fees will be higher. While in longer terms the interest payable will be higher.
If I already have a payday loan, can I get a mortgage?
Yes, in fact with a payday loan you could also get another or even a mortgage loan. The important thing is that you are aware of the payment of the loan installments, which implies not being in asnef or another register of defaulters, and that after paying the first loan you have sufficient income to pay the installments of the other loan. That is, you have the capacity to borrow based on your income and monthly payments. That is why it is sometimes better to cancel the first loan or refinance it so that the monthly installments to be paid are lower. And thus be able to have more possibilities when applying for the new personal or mortgage loan.