Payday loans: what are they? How the relationship with the bank works
Payday loan are loan in which the bank guarantees the fulfillment of certain obligations of the member in giving, doing or not doing, or in assuming in his own interest a debt as the principal.
With the signature credit, the banks basically undertake to pay a debt in favor of a third party , if the franchisee is unable to promptly meet the commitment made (obligation). The signature credit, therefore, is not a real loan, but a guarantee that is issued by the bank at the customer’s request, so as to guarantee fulfillment in favor of a third party.
This means that, if the client does not fulfill the obligation assumed, the bank will personally pay the amount set to the beneficiary of the guarantee. In doing so, the signature credit is transformed into a cash credit which must be repaid to the bank by the guaranteed customer.
Thanks to the payday loan, companies will therefore be able to operate by exploiting the bank’s guarantee and, therefore, obtaining better commercial conditions from any third parties.
Loan, or payday loans , may be commercial or financial based on the nature of the secured transactions.
The commercial payday loan are when the seller and the buyer want to protect each other and the bank guarantees the payment of a debt of the customer towards a third party.
Financial payday loan, on the other hand, occur when a bank undertakes in the interest of the customer towards third parties at a given disbursement upon the occurrence of a given event. All those small and medium-sized businesses that need to have a bank guarantee to fulfill the obligations deriving from relations with Ministries, Municipalities, VAT Office and so on will be able to use financial payday loan.
The banks grant payday loan to customers, both residents and non-residents, against the payment of commissions and a reimbursement of expenses . All the payday loan fall within the off-balance sheet items and may or may not be backed by guarantees.
Payday loan are in turn divided into simple or documentary , where documentaries are those loan which, in order to be granted by the banks, require the delivery by the customer of documents relating to shipments of goods . The simple payday loan, on the other hand, are represented by the credit line for acceptance or endorsement.