What’s the Difference Between a Personal Loan and a Payday Loan?

June 14th, 2011 |

Getting a loan should be about urgency, not fun and frivolity. But no matter what you need the money for and what you are going to use it for, there are options out there for you. A loan and a traditional personal loan are two very different types of credit.

It’s important to know how to use each one so you don’t end up with overwhelming debt later. A payday loan or a personal loan, in many cases, is superior to using a credit card. Credit cards generally ask for a minimum payment that will ensure you must keep paying interest for a long, long time.

With a personal loan, you usually pay a much lower interest rate, and with a payday loan you simply pay a one-time fee. Generally, your personal loan will be funded by a bank or other large financial institution.

A person usually gets a personal loan for big purchases, such as houses and cars. You and your lender will agree to the terms of the loan, including how long you will have to pay it off. The term of a loan is usually at least a couple of years.

Most people take from three to five years to pay off a car loan, for instance. A personal loan for a home – a mortgage – can have a term of anywhere from 10 to 30 years. Now, because of the mortgage crisis and the economy, some lending institutions are even extending mortgage terms to 40 years in order to lower monthly payments.

A personal loan is for when you need a lot of money and a lot of time to pay it back. If you need a smaller amount of cash – say, a few hundred bucks – and you want to pay it off as soon as possible, a payday loan is definitely the way to go.

Now, thanks to the ever-expanding power of the Internet, getting a payday loan is easier than ever. You can get an online payday loan through many different lenders, and the funds will be directly deposited into your bank account.

You’ll have access to the money in just a couple of hours. You can pay off the loan and the service fee when you get your next paycheck, and then you’re done! Online payday loans are good option for financial emergencies because they are easy and fast.

If you car breaks down, you run out of groceries and money at the same time or some other major, necessary appliance goes out, a payday loan is a great solution. In some cases, especially if you have a very large expense come up unexpectedly, a personal loan might be useful as well.

However, getting a personal loan is a much more lengthy and involved process. It’s rare that you can walk into a bank and request a personal loan and walk out with cash the same day. Online payday loans are easier than applying for a personal loan because you can do the whole thing online with no faxing or mailing.

However, there are many different brick and mortar lenders that will do loans face to face. Online payday lenders generally don’t do credit checks, so even if you have bad credit or no credit history, you will likely still qualify for a payday loan.

When applying for a cash advance loan, the bank will most definitely do a credit check. Your credit will determine the interest rate you will pay and the total amount the bank will be willing to lend you. Of course, your credit score could also mean that you won’t be able to get a personal loan at all.

But if you can’t qualify for a personal loan, never fear! You can apply for a payday loan of up to $1,500 depending on the lender so be sure to ask and compare different lenders. Check out installment loan options if you are worried about being able to pay back the whole loan all at once.

With the poor economy, more typical payday lenders are offering different kinds of loan products.

About the Author

Jack R. Landry has a PHD in financial services and has written hundreds of articles relating to consumer services and payday cash loans. He has been a consumer advocate for nearly 25 years.

Contact Info:
Jack R. Landry
JackRLandry@gmail.com
http://www.checkcity.com