Payday Loans vs. Personal Loans

There are times when money seems to be running short. During these trying times, people often tend to rely upon money lenders. While there are many financial tools available, most people often go for payday loans or if not personal loans. What are the differences between the two?  We underscore the difference between two types of loans - payday and personal. 

There are several aspects that a borrower often looks into before applying for a loan. One of them is the needed documents and speed of approval. Payday loans or cash advance have little documents needed. Most companies which offer this service require the borrower’s social security and tax identification. Apart from this, companies also need an active bank account, proof of income or payslip. With personal loans, the things listed above are also needed, but there are more documents that the money lending service may require.

Factors to Consider

Another factor is the release of check or money to be loaned. Most borrowers go for loans as there is an impending need for cash. If this is the case, the fastest track is with the payday cash advance. Most companies that offer cash advance often gives their approval within the day, some even offer an instant decision within the hour. There are also some personal loan providers that give quick decisions; however, cash advance still wins as it will only take about one to two days before the check is released or the money is wired to the borrower’s bank account. Surely, if the money is needed within the week, a cash advance loan will certainly be a big help.

Third factor to consider is the payment scheme. There are different preferences for a borrower. If the person is the type who does not want to be constantly thinking about debt and will rather pay upfront, then a cash advance loan will be ideal. This is paid within a short period, often on the borrower’s next payday, hence the term. There are borrowers on the other hand who do not want to feel the burden of money, that is why they prefer to have a long time payment scheme, like that offered by personal loans. These can span from a year to ten years in payment. 

Collateral, yes or no?

A collateral or what is in exchange for the money that a borrower will get is also another factor to consider.  Again, this will depend on the borrower’s preference. Some borrowers do not want to endanger their homes and cars. If you are that kind of borrower, then going for a cash advance loan will be recommended for you. On the other hand, if you are a borrower who do not want to worry about payment anymore and prefers to rather pawn your house and car (plus interest incurred need to be paid as well), then a personal loan is better. Do note that there are personal loans which do not need collateral, however, this may vary according to the financial agency the borrower talks to.

Lastly, a borrower looks into the interest rate. As mentioned earlier, payday loans are short term; hence they have a high interest yield. Personal loans have the lower interest rate of the two, but this may vary depending on the financial institution.

Before borrowing any money, make sure that you know what you are going for, understand the payment terms, the interest, and collateral involved.