Never Miss a Payday Loan Payment!

We can have many reasons to opt for a loan, such as unexpected expenses, a family wedding, refurnishing a house or even meeting educational expenses in a foreign state. We may need loans for many reasons, but the type of loan that we desire depends entirely on the circumstance in which we want the loan. Those who need less than $25,000, and also have good credit rating prefer unsecured loans.

Payday Loans are usually considered for the purpose of short-term money. These loans are especially suitable for people who do not have satisfactory credit rating. Payday loans are actually short-term loans that are taken against earnings and are required to be paid back as soon as the paycheck is received. The borrower is required to fulfill certain characteristics, so that he becomes eligible for this kind of loan. Proof of earning of at least three months along with the proof of age being above 18 years is required to be submitted to the insurance company. This kind of loan is best suited for emergency purposes, but not suitable for making it a long term or a regular source of finance.

Secured Loans are more suitable for long-term purposes:

Secured loan is also another option for those people, who have a poor credit rating. Since this is a secured loan, it is more suitable for those who have a home. The process is quite similar, as the lenders just lend money against the equity in a home. The home can be either mortgaged or fully owned, but the loan is provided on the basis of such a home. The interest rates on such loans are usually low and the repayment periods are too long. There are loans that may be repaid in a long time period even extending up to 30 years. The representatives of the lending company assess the house, on the basis of which the loan is provided, in order to decide on the valuation of the asset. There are many lenders, who lend as much as 125% of the valuation of the house, others may settle at 85% of the equity value.

The Negative Equity Trap

The main problem that exists with the loan is that the interest rates of the loans may rise and fall with the value of property. In case of the property value dropping, there is a rise in interest rates and the homeowners find themselves trapped in a negative equity. This negative equity has the effect of increasing the amount of repayments. This is not good for the financial health, and has can damage the credit rating of the borrower.