The retail model traditional way of securing pay day or business loans is for a borrower to go to the lending bank and ask for a small guaranteed loan with agreement to pay back the loan with accrued interest rate on his next paycheck. The borrowers will usually give a promise, postdated cheque to the lending bank, which will contain the full amount of the loan (the principal) and the fees (the interest rate) for the loan. This is what the lender will have as collateral for the loan given to the borrower.
On the maturity day when the unsecured personal loans are expected to be paid back, the borrowers will have to go and pay back the loan or they can give instruction to the lenders to redeem the repayment through the post dated cheque issued last time. If however, the borrowers do not have enough money in the account by the time the lenders get to their banks and present the cheque, the borrowers have incurred bounced cheque fee from their banks that will still pay the unsecured loans bad credit that will be charged against the accounts of the borrowers. More additional fees will be incurred if the borrowers do not fund their account in time.
The recent advance in technology in the area of financing and banking has brought about some innovation whereby the pay day loans can be processed over the internet (online). Here, the consumers or borrowers will fill the online loans application form and submit with necessary backing documents through fax or other similar methods to the lending bank. After verification at the backend of the online loans lender and the borrowers have satisfied all requirements to get the unsecured loans, the funds or loans will be transferred directly to the borrowers’ accounts that have been presented when applying for the loan.
Loan repayment and another finance charge on these unsecured loans for bad credit are equally withdrawn electronically from the borrowers’ accounts on their next payday.
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