Both the revolving credit and the payday loan provide a sum of money from a bank or credit institution but at different rates and repayment terms. Is it better to opt for a revolving credit or for a payday loan?
What is the advantage of opting for a revolving credit?
The revolving credit makes it possible to freely dispose of a sum of money determined in advance between the lender and the borrower, and the borrower can use this sum of money as he sees fit, without having to justify it. expenses. Once the credit is subscribed, the money is available to the borrower. However, this credit will not cost him anything if he does not use the amount of money he has at his disposal.
On the other hand, if the borrower uses the unlocked funds, he will automatically activate the loan. From this moment, the credit produces interest whose amount can rise to significant percentages of up to 16% or even 20%. Moreover, the peculiarity of this type of credit is that the funds are reconstituted as and when repayments made, hence its name revolving credit or reconstitutable.
Very useful for borrowers who want to have liquidity quickly, the revolving credit must however be used with care to avoid the risk of over-indebtedness in case of mismanagement.
What is the point of choosing a payday loan?
Like the revolving credit, the payday loan makes it possible to freely dispose of a sum of money. But generally, without this being an obligation, the borrower will use that amount of money to finance a particular project. The payday loan is ideal to afford a trip or to pay a new car for example.
However, unlike revolving credit, the borrower knows from the outset the amount of his future monthly payments because they are fixed from the beginning to the end of the repayment term. The advantage of the payday loan is that it allows to know exactly the precise amount of the monthly payments without there being any nasty surprises.
In addition, interest rates are significantly lower than with revolving credit since they are between 3% and 10% against 16% to 20%. But the interest is systematically repaid as soon as the payday loan is activated, while they will not be reimbursed under the revolving credit until the funds are used.