How does an online payday loan work?

 An online payday loan is cheaper than a loan taken out in a bank branch because the bank has less processing costs than a face-to-face meeting. However, there are major differences between the individual offers for online payday loans, so that a price comparison is essential. In addition to the effective annual interest rate, loan seekers pay attention to contractual conditions such as the possibility of free repayments or the right to occasional suspension of installments.

Naturally, the agreed term also affects the total cost of an online payday loan, as the agreed interest is payable each year. For many banks, the processing time for a loan application submitted online is one to two weeks. If you want a faster cash payment, opt for an instant loan. In this case, most domestic banks pay out money within two banking days.

The loan application

The loan application

For an online payday loan, the borrower must fill out a loan application, sign it by hand and send it to the bank. A fax fulfills the legal requirements for handwritten signatures, but some banks explicitly require access to the documents by post. Almost every financial institution requires submission of at least the current pay slip for loan processing. Depending on the bank, copies of the last three pay slips must also be sent in.

Whether the applicant has to submit a copy of his employment contract or a copy of the current account statements is handled differently depending on the bank and is clear from the instructions given by the credit institution for sending the required documents. The self-employed and freelancers usually prove their income from online payday loans for private purposes based on the latest tax assessment.

Employees with additional income make sure that they choose an online bank as their contractual partner, which includes all income and not just the main wages in their household accounts. The bank makes the Credit Bureau request automatically. If there is a negative credit rating, consumers can take out an online payday loan without Credit Bureau in Switzerland.

It is generally not necessary to state the purpose of use for consumer loans taken out via the Internet. Special products such as car loans are an exception, since in this case the bank explicitly grants the low interest rate only for a specific use of funds.

The identity check

The identity check

Legislation prescribes identity verification every time a loan is granted. An exception only applies if the bank’s credit customer is already known from an ongoing or previous business relationship. The usual way to verify your identity is to use the Postident procedure. For this purpose, the credit customer visits a post office of his choice, where the employee compares his personal data with the data listed in the ID card.

Some online banks with additional branches allow the applicant to personally present the ID in a branch. A special feature applies if the online bank has acquired its license in Luxembourg. In this case, unlike the financial institutions certified by BaFin, it may recognize a copy of the identity card as a legitimation for borrowing.

The payout

The payout

The requested online payday loan is usually paid out by bank transfer to the borrower’s checking account. Upon request, individual institutes offer the loan disbursement through a payment instruction for settlement. The recipient can submit these to a bank account for credit or have them paid out in cash at a post office.