When it comes to payday loan vs personal loan which one should you pick? Well, here’s the comparative guide that’ll explain it all for you. Choose wisely.
Need an urgent source of funds? Well, the cash crunch is the biggest challenge that most businesses or startups face. Most people would recommend a payday loan or a personal loan.
A personal loan and a payday loan are not the same things. You must know the benefits of both loan types before making a decision to see which suits you.
But, most of us struggle while choosing between these two options. So the actual dilemma here is:
Which kind of loan should you take?
Well, you don’t have to worry anymore. Because prepare this article to tell you among payday loan vs personal loan which one you should pick.
Throughout the article, we’ll talk about all the pros and cons of both these loan types. This should help you make the decision after being informed.
So, without waiting further, let’s get into it.
Payday Loan vs Personal Loan
Both a payday loan and a personal loan have their own perks. But they serve entirely different purposes. So, it’s better if you weigh them against each other.
So, here are both of them with their pros and cons:
Personal Loan
This is the loan type for you if you’re in need of a lot of money and want quite some time to repay it. Personal loans let you do all that at a low-interest rate.
Banks usually check a person’s credit score before giving out a personal loan to them. So, if you’ve taken a loan before, you have high chances of approval.
Now, let’s check out its pros and cons.
Pros
Here are the pros of personal loans.
Unsecured
Unlike other types of loans, personal loans are not secured. Meaning that they don’t require any kind of collateral to get approved.
So, all a person has to do here is fill a form and give his/her identification information. That’s pretty convenient, right?
Well, it makes getting approval for loans a whole lot easier. Let’s see what the next pro holds for us.
Makes Budgeting Easier
As the monthly payments are fixed due to the fixed interest or EMIs, it makes it easier for people to budget the loan payments. Way easier for the books.
This makes things simple and helps keep track of repayments. Now, let’s check out the last pro.
Bigger Loan Limit
Personal loans have a bigger loan limit thanks to the long repayment period, compared to the other loan types. So, if you want a good amount of cash, this is the way to go.
Those were all the pros. Now, let’s check out the cons.
Cons
These are things about personal loans that are bothersome.
Here they are:
Hard to Get Approval
Due to the credit check done on applicants, it’s hard to get approval for a personal loan. Sometimes it takes days on end to get the application pulled through.
Temptations for Bigger Loans
Banks have a habit of tempting people to take bigger loans by lowering interest as the loan amount increases. This throws people in an unwanted dilemma.
Those were all the pros and cons of personal loans. Now, let’s check out what payday loans have to offer.
Payday Loan
Payday loans are for people who need urgent cash and intend to pay it from their next paycheck. It might be intriguing, but it has both its pros and cons.
Let’s check and weigh these pros and cons now.
Pros
These are the things that we found beneficial about payday loans.
Quick Money
Payday loans are processed really fast. You’re likely to get approved on the day of application, provided that you have all the documents needed.
Easy to Get Approval
Thanks to the small sum and security with a paycheck, payday loans get approved without a second thought. After all, they know that you need some quick money.
Cons
These are the things that weren’t what we wanted out of payday loans.
High-Interest Rates
The interest rates are very high when it comes to payday loans. It’s mostly due to the short tenure. So, it’s best to pay off the debt as soon as you can.
Potential Crisis
If you aren’t able to pay the debt off in time, you’ll see them start piling up. So, payday loans can create crises if not dealt with carefully.
Those were all the pros and cons of payday loans. Now, if you think you need some quick money, you can visit Paid day loans.
The Comparison
As a bonus, we are adding in two comparative charts to make your evaluation easier. These charts show the key differences along with the pros and cons of these two loan types.
Here are some of the key differences between payday loans and personal loans:
Key Differences | ||
| Personal Loan | Loan Kind | Payday Loan |
| Unsecure | Type | Secured to next payment |
| Up to a certain amount | Loan Amount | Up to 40% of the monthly salary |
| 1-60 months | Tenure | 1-2 weeks |
| 10.25-23 | Interest Rate | 35-50 |
Here’s a comparative chart of the pros and cons to help you out with your decision:
Payday Loans vs Personal Loans | ||
| Payday Loans | Personal Loans | |
| Pros | Quick Money Easy to Get Approval | Unsecured Makes Budgeting Easier Bigger Loan Limit |
| Cons | High-Interest Rates Small Loan Limit | Hard to Get Approval Temptations for Bigger Loans |
The Verdict
This was all we had on payday loan vs personal loan which one you should pick. We put together this comparative guide to help you out and we hope it served its purpose.
Both these loan types cater to the needs of different kinds of customers. So, it’s important that you know which one to avail for your situation.
For example, the payday loan is for someone who needs urgent cash. On the other hand, personal loans are for someone who wants a good amount of cash.
So, it’s important that the loan fulfills your needs and serves your purpose. So you need proper evaluation before you make a decision here.
Also Read:
⇒ Benefits of Bank Loan for Small Business
Other than that, if you think we missed something or have suggestions in general, you can leave a comment down below. We will get back to you.
Till then, stay safe and choose wisely.