London, United Kingdom (PressExposure) July 22, 2011 -- Many people need a little extra cash sometimes, this can be obtained with a personal loan or a payday loan. The main difference between these two options is that a personal loan will have repayment terms over a long period of time with reasonable interest rates. A payday loan is a short term transaction with terms usually between two and four weeks long. The idea of a payday loan is to get a little extra cash and then pay it back when the monthly payment is made from an employer.
It is possible to get payday loans very easily over the internet. Payday loan websites do not check credit history before issuing one of these short term loans and this is why many people wonder whether payday loans affect your credit rating. Although the credit rating is not a deciding factor on whether the loan is issued, there are other implications to consider.
When a lender issues a payday loan they require only certain details from the borrower. This includes basic contact and personal information as well as details from the borrower's current account. The money is deposited into the borrower's account, it is then removed automatically once the salary has been paid into the current account for that month. If the borrower does not have sufficient funds in their bank account on the due date of the loan, there will be additional fees or penalty charges issued. If a borrower can not keep up with these additional payments then the lender may report the situation to the relevant authorities.
Payday Loans have much higher interest rates than standard personal loans. They also carry heavy penalties for late payments which can be crippling to some people. Anybody who falls behind on repayments is at risk of being reported to credit agencies.