These are also other forms that can be used to secure loans for a business entity. These types of “collateral” are usually used only when there are smaller sums of money required by the borrower as the collateral put up in most cases in also small in comparison.
Simply explained, the payday loan is effectively a type of advancement given to the individual seeking quick financial help for a short period of time.
The money lent would usually reflect a lesser than the amount to be received in the form of the payment for work rendered at the end of an agreed time frame.
This sort of borrowing and lending is usually done to cover expenses quickly and over a short period of time where the lengthy processes involved in getting a legitimate loan from licensed lending establishments would be inconveniencing and almost always unattainable.
This type of loan arrangement is usually classified as an unsecured loan by comparison. Ideally payment would be received in exchange for perhaps a post dated check which would include an interest amount calculated on the principal borrowed, and if by the collection date of the paycheck the borrowed is unable to make good on the agreed amount then the situation become complicated and nasty as the relevant machinery is put into different courses of action to recover what is due.
Car title loans are also another type of typically short term loan styles. In this scenario the car which is already paid for and considered a viable asset is put up as collateral for the intended loan amount.
The loan amount usually agreed upon is far less than the value of the car itself. Adding to this the interest charged for this type of loan is usually much higher than other types in the market as the risks involved are also usually higher. Although credit checks are done before the loans are approved these checks are rarely very stringent in nature.