Do you want to borrow money for a car, finance a renovation or take out a loan for solar panels? Whatever your loan objective is, it is important to match the loan form to this. The two most common types of loans are the personal payday loan and the revolving credit. But what is the difference between both types of loan and when do you opt for a revolving credit or personal payday loan?
Personal payday loan or revolving credit?
With a personal payday loan, both the loan amount and the interest rate are fixed in advance. You also determine the term of the loan in advance with the bank. These three components do not change during the contract period. This way you know exactly how much you pay each month when you enter into the contract with the bank. Your monthly payments consist of a part repayment and a part interest.
Do you want to repay the personal payday loan (in part) early? Then some lenders charge a fine. That is because in that case you pay less interest than previously agreed. The lender therefore misses out on income and compensates for this by imposing a fine on you.
Difference between revolving credit and personal payday loan
The revolving credit has a variable interest rate. It may therefore be that the interest rate changes (several times) during the term. This variable interest is usually somewhat lower than the fixed interest rate of a personal payday loan. In addition, you agree a credit limit with the bank for a revolving credit. This is the maximum amount that you can withdraw. Within this limit you can withdraw, repay and withdraw unlimited amounts. You only pay interest on the amount that you actually withdraw.
You also speak of a theoretical term with a revolving credit. This is the term when you pay off a certain percentage of the credit each month. Because the revolving credit has a variable interest rate and you can take back amounts already repaid, you do not know in advance exactly how long you will take to repay. Unlike with a personal payday loan, you can pay off as much as you want with a revolving credit, without having to pay a fine.
Personal payday loan or revolving credit – Select loan
As mentioned, it is important to align your loan objective with the loan form. A personal payday loan is more suitable for loan objectives where you know exactly in advance how much money you need, for example the purchase of a car or kitchen. A revolving credit is better suited to a loan goal where you do not know exactly in advance how much you need, for example a renovation.