Pledging a Collateral can decrease Overall cost For short term loans
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Canada and United States are known as two of most developed nations of world. Citizens living here face lot of expenses in their routine life. They are earning hard to live up to expectations of their financial life. Some of them have also adopted saving schemes to deposit money for unexpected economic circumstances. But some of consumers are so engaged with their daily expenses that they cannot manage to save even a little money. That’s why whenever they face emergency cash needs they look for every resource to borrow money. When they fail to borrow a bank loan or from any friends or relatives, then payday loan is the only option left behind for them.
Payday Loans are short term loans that offer instant cash unto $1000 to borrowers in at most one business day. A borrower is expected to return that loan amount along with calculated interest rate to his lender on receiving his next salary check. If he cannot pay back on due date then he can also ask for extension period form his lender by paying some extra fee. This quickest service does not come at cheap rates or free of cost. A borrower pays a heavy annual percentage rate including loan fee. Basically they are unsecured loans but there is another form too that lower down interest rates to some extent.
They are those in which borrower pledges some collateral against borrowed loan amount. It can be any asset, property or any other item that holds big cash value. The monetary value of asset must be equal to amount borrowed or higher than that. Generally, people pledge mortgage loan borrowed. When borrower pays back all amount then he can get feed his belonging. But in worst cases, if borrower performs non-repayment then lender can legally cease his property. Qualifying for these loans is very easy. When borrower put some asset against loan, then some lenders don’t even consider credit history of applicant. They are preferred by borrowers who cannot afford to pay back high amounts as this loan scheme acquire very low interest rates. Moreover, there is no hidden fee and extra charges incurred by lender. They are secured for both borrower and lender as borrower can ask for loan amount immediately by pledging any monetary asset and lender needs not to worry about repayment because he can cease borrower’s collateral to compensate his losses in case.
Unsecured Loans are those in which borrower is not supposed to pledge any collateral. All regular payday loans belong to this category. They neither require credit nor any collateral; but they do charge very high interest rates. As lender does want to risk his money in case of non-repayment. So, they try to take back through interest charges. But if borrower pays back in time, then he can be trusted for future lending.
Qualifying for both type of loan is very easy as one needs to be 18 years old Canadian citizen. He must be earning at least $1000 per month under same employer since last three months. His active bank account is necessary to carry out loan transactions. All these basic details are collected in online application form itself. So, there are no useless paper work and faxing formalities.