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Payday loans versus personal loans: What’s the difference?

It’s hard to predict when an emergency arrives. Often times, the sudden need for money is so unforeseeable that we often don’t enough cash in our stash to provide for it. But no need to sweat out when these sudden needs appear. There are certain loans available today that may help you get the amount that you need in just a few interest.

The most famous type of loans nowadays are payday loans and personal loans. Yes, these two are different from each other? Which type of loan will fit you and your current needs? Read on and find out.

Personal loans

The more traditional type of loan, personal loans are those loans that you get from bank and other traditional lending companies. This type of loan can be used as mortgage to your house and payment for your loan. It has a fixed interest rate and a fixed repayment period. Here are some of the pros and cons of personal loans to help you figure out if it’s the best for you:

Pros:

The major advantage of a personal loan is that it has lower interest rate compared to payday loans. It’s a good option when you suddenly need cash for an emergency or there’s a business that you need to spend in. Another major benefit is that personal loans can consolidate your card debt and improve your credit score if you pay for it on time.

Cons:

Getting approved for a personal loan means improving your credit score, filing out documents, and enduring background checks. If you are in a hurry to get your money then this might not be the best option for you.

Payday loans

Fast and easy, payday loans are popular because of its accessibility. Tons of online money lenders nowadays are offering this type of service. Payday loans are high interest short term loans that can be paid at any schedule or even on your next pay check. Because of its easy application and accessibility, many people are opting for this type of loan, making their emergencies payable. Here are some of the benefits and disadvantages of payday loans.

Pros:

Of course, payday loans are very easy to get. Just fill out an online form and you can get the money the very next day. Simple and easy. No need to endure those long bank background checks, no need to improve your credit score. It’s also very personalized. You can create your own payment schedule based on the date of your next pay check and so on. Another factor is that you can loan small amounts. No need to loan for a huge amount that you won’t be able to pay. Just a few hundred bucks will do.

Cons:

It has higher rates than traditional loans. According to research, those who took payday loans and paid for six renewals actually paid more than the usual. And of course, not all online money lending companies are trustworthy. Do your research first before trusting any companies with your personal information. Payday loans won’t improve your credit score since it’s not affiliated with any bank.

The best way to figure out which type of loan fits you is through assessing your need. If you really need the money as soon as possible, then there’s no harm in opting for a fast and easy solution such as payday loans. But if you have more time and if you want to improve your current bank status and if you want lower interest rates, then personal loans can be the best way to provide for your current needs.

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