Personal Loans Vs. Payday Loans

When people find themselves strapped for cash, they seek out lenders to get the money they need. Loans involve banks or certain companies, lending people money, which have to be paid back with an added interest included in the payment. There are different types offered to the public, personal and payday loans being two of them. These two types of loans are used in different situations which vary with the borrowers’ needs.

Loan

The differentiation’s between the two loans are as follows;

The time period

A Payday loan is issued for a short period of time, usually until your next pay check. This kind is for when you have no money until your salary arrives and you require cash, and so you get a loan to be paid back once your salary comes in. These are usually taken up over a number of days as opposed to months or years. A personal one on the other hand, is for a longer period of time and is supposed to be settled through instalments.

The processing time

The time taken for it to be approved varies between the two loans, with personal ones having a longer processing period than the other. Payday loans are designed for convenience and efficiency where money can be obtained fast. If you wish to get personal loan in Singapore, it will take you a longer time; they make take a few days or even weeks to process while it would be merely a matter of hours with the other.

Past credit score

When it comes to payday loans, one’s credit score is not taken into account. The eligibility is assessed through the availability of an income. When it comes to a personal loan however, there is a check that occurs to see if the borrower’s credit score history shows reliability in loan repayment.

Interest rates

One of the biggest differences between a personal loan and a payday one is that the latter has significantly higher interest rates. There is controversy surrounding the high interest rates that come with payday loans as being said to exploit people. Once you take out a loan, you have to pay back a substantially higher amount back. In the case of personal ones, the interest rates are much lower.

Liability

Neither requires collateral to be secured as back-up in case the borrower is unable to pay back the loan.  However, sometimes if a person has a bad credit record, they may have to bring along a trustworthy co-signer when getting a personal one.

The decision as to whether to obtain a payday or a personal loan ultimately rests on what the purpose. If you need money quickly and with less hassle, a payday one will be appropriate for you.