The personal payday loan is a loan that is not granted by a commercial provider such as a credit institution. Instead, the lender is a private individual.
In principle, the lender can be any third party. However, very often personal payday loans are granted to relatives and are therefore also called relatives. Outside of the circle of relatives or acquaintances, private credit is mostly obtained via online credit exchanges on the Internet, although private loans with strangers are rarely taken out overall.
What should you look for in a personal payday loan?
A common reason for a personal payday loan is that no commercial lender like a bank wants to take the credit risk. For example, the low level of personal payday loan lending to non-related parties is primarily due to the difficult-to-determine creditworthiness of the borrowers. Therefore, granting a personal payday loan generally poses a high credit risk for the private lender.
Since private loans can also be closed informally, it can easily lead to problems of provability in the event of a recovery. A written and legally correct contract conclusion is therefore advisable.
Personal payday loan as a synonym for consumer credit
The term personal payday loan is used in many cases as a synonym for a consumer loan to private customers. The consumer or consumer loan is a bank loan that serves the customer to finance consumer goods or services. This is to be distinguished from the overdraft facility, which usually has a short term, is not tied to any purpose and is intended to ensure the liquidity of the borrower.
Consumer credit, on the other hand, is mostly medium or long-term and tied to a specific purpose. It thus acts as an instrument to purchase or use consumer or durables or services in anticipation of future income. Therefore, full financing within the personal payday loan is rather the exception. Credit institutions generally require an equity investment of between 10% and 25%. In addition to the goods purchased from the loan, household security, motor vehicles, and wage and salary assignments are customary collateral.