A comparison between personal loans and payday loans

Sometimes you may need immediate access to more money for emergency reasons.  You may need to pay off some urgent bills or buy something that you need urgently.  You may find yourself searching for coins in your coin box or pockets, and at the end of it, taking an online payday loan. There are other ways to obtain loans but they are more conventional and do not work like payday. Let’s see how personal and payday loans differ, which one is worth the risk?

Personal loans

When you receive personal loans, you sign an agreement with the lender to make payments over a number of years. The payments can be monthly or yearly depending on the terms of the lender. Most lenders impose the payments on your income so the payments can be deducted before you get access to your full income.

You can use the loan however you wish. Whether it is for personal use or business investment, the loan is not restricted to any specific functions. There are strict requirements put in place for people who want to receive personal loans. Usually lenders carry out a thorough screening before they approve loan requests. It can take weeks or months before you get an approval form a lender. Access to application of personal loans is limited to weekday working hours.

Before you get a personal loan, most lenders will check your credit score. If you have a bad credit score, the lender is less likely to approve your loan. If you get a loan, it will be lower than the amount you expected and the lender will impose high interest rates.

Paying the loan on fixed rates, such as monthly makes the loan repayment easier. With a good payment plan, you will clear the loan in no time.

A pay day loan

Pay day loans are short-term loans meant to be paid between two weeks and three months. The payment depends on the lenders terms. You can choose to pay the lone fully or in instalments, as long as the payments are within the expiry dates.

Pay day loans are convenient for immediate financial emergencies. When you request a payday loan, you receive the money almost immediately or within 24 hours.  The requirements to receive a pay day loan include an identification card, a bank account and proof of regular income.

Payday loans come with very higher interest rates compared to all other forms of loans. When you receive a payday loan, immediate interest is employed on the loan.

Getting a payday loan is quick, convenient and almost everybody is eligible for a loan.  You can easily access the money even with a poor credit record. The payday records do not appear on your credit card record buy they may appear on your bank account record.  If credit companies have access to these records they may include them in your credits. In this case when you make payments on time, your record becomes better but if you miss payments regularly you ruin your credit records.

 

Both types of loans can be helpful depending on your intention and situation. Personal loans are convenient for big purchases while payday loans can be helpful when you need quick cash.

Categories: Pay Day Loans