Payday Loans vs. Personal Loans
Before considering a payday loan, or any other cash advance loan, it's always smart to do your homework and weigh all your options. One type of loan many people consider while looking at a payday loan is a personal, or personal loan. Before making the choice between a payday loan and a personal loan, take the time to really look closely at why you need to borrow, how much you need, and what you can afford to repay.
First of all, are there major differences between a payday loan and a personal loan? Both are often referred to as personal loans and neither requires collateral, such as your home or car, as a part of the terms of the loan contract. The primary differences have to do with how much you can borrow and at what terms. A payday loan is often a good choice for short-term fast cash, like when you just need to occasionally bridge the gap between paychecks, while a personal loan may be an option for major purchases that require a large, lump sum of money. Below you'll find a clear comparison of the two types of loans so you are better able to determine which one is right for you.
Personal loans are loans that don't require collateral. These loans are approved solely based on your credit history and, in theory, are available to those who do not own a house or car. Personal loans generally have fixed terms and interest rates, and because they are often for relatively large sums of money, personal loans are repaid monthly.
Unfortunately, because of the risk to the lender and lack of collateral, fewer banks currently offer personal loans than did in the past. Because these loans are offered solely on the basis of credit rating, individuals with even OK credit may have a tough time qualifying for a personal loan. To qualify for a personal loan, you'll most likely need to have an extensive credit history and a very good credit score. The terms of repayment are also not as good as they once were, with interest rates now typically almost twice as much as the interest rate for a secured loan.
If you do qualify for a personal loan, make sure you feel confident in your ability to repay this loan under the terms extended to you. A few missteps with this type of loan can easily wreck your credit in the long-term. Even though a personal loan poses no risk to your home, defaulting on a personal loan can create quite a financial burden. Additional fees may be added to your monthly payment, compounding what you owe. If you continue to default and have made no attempt to contact the lender to negotiate a payment alternative, your account may be sent to a collector. In some cases, legal action may be taken against you.
A payday loan, as mentioned before, also doesn't require collateral. A payday loan is typically used as a short-term solution for occasional cash flow problems. These loans are usually for a relatively small amount of money, generally between $50-$1,500, and past financial information is not needed to qualify. Payday loan fees are upfront and never subject to increase if you simply repay your loan when scheduled. In terms of APR (Annual Percentage Rate), these upfront, flat fees may look high, but this is because these loans are typically very short-term. Visit Check 'n Go's Resources section to get the facts on APR.
Because past financial information is not required, most anyone over the age of 18 with a steady income can get a payday loan when the need arises. If you need fast cash, a payday loan may be the best option. Since the application process is relatively simple, payday loans are typically available as quickly as you need the cash in your account. Find out more about payday loans and the payday loan process today.