Personal Loans Vs. Payday Loans

Both personal and payday loans aim at helping you paying for purchases or expenses that you cannot afford otherwise. Both of them allow you to fulfill your need for extra cash. So, when you are in urgent need of money for any purpose, you can look for either of these loan options.

Now, the question is, which one is better? We’ll discuss this question in this article.

Let’s start with personal loans-

Personal loan comes under the category of unsecured loans because you do not have to put any of your assets at the stake as a guarantee that you have to do when applying for a mortgage or a car loan. So, in case, if you don’t pay back the loan, the bank cannot seize any of your assets as it happens in the case of a mortgage or a car loan.

However, when it comes to personal loan approval, it takes time. Banks check your paying capacity before granting you the loan, and they approve your request only if they are satisfied that they will get their money back. They ask for your income details and tax returns. They check your credit score to become sure that they will not have to struggle to get their loaned money back. This loan is available at different interest rates, and banks decrease or increase it seeing your repaying capacity.

Let’s now talk about payday loans-

This is short-term loan provided by financial institutions to help people meet their quick financial requirements. The interest rate is high for it and you have to repay the loan amount with interest by the next payday. However, some lenders provide a structured installments options as well. This is ideal when you need a small amount quickly.

Payday loan approval does not take much time, and lenders grant this loan seeing your salary slips and income tax returns. They do not go to check your credit score.

Then which one is better?

What do you think? Both have their own pros and cons. If you need a short amount immediately and you cannot wait much for it, payday loan is perhaps the best choice. On the other hand, if you need a big amount and you need this for a long period of several years, then personal loan is the right choice.

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