What exactly are Payday loans and how do they work?

Payday loans are used for short-term lending whilst you are awaiting your pay. Payday loans can be a handy way to bridge delays in your pay. In this article we are going to discuss payday loans and comparing them against crypto loans.

Payday loans: how much do they cost?

According to Financial Conduct Authority (FCA) rules, payday loans are capped by law.

There is a limit on the amount of interest and default fees that can be charged.

It is common for payday loans to provide fast cash for small amounts that must be repaid in one lump sum. If they are not repaid in full by the due date, additional fees are typically charged and the due date is extended. Re-upping over and over again can result in increased fees. You can use a loan for anything you desire, even paying for a moped for sale.

Crypto loans: what are they?

Traders can obtain liquid funds with crypto loans without selling their cryptocurrencies. In place of cash or stable coin loans, they use their digital assets as collateral.

The reason individuals take out crypto loans instead of selling is that they expect their crypto asset's value to increase or because they want to hold the asset long enough to avoid short-term capital gains tax.

Types of crypto loans

Several types of cryptocurrency loans are available:

Collateralised loans