Difference Between Payday Loans and Personal Loans
As a matter of fact, numerous people think that payday loans and personal loans are similar but it is far from reality. These two however are totally different structures. Generally, payday loans are secured on your next paycheck and short term. The payday lenders are very eager to offer this solution to their customer’s financial woes. These loans however come with bigger penalties and higher interests.
When it comes to personal loans however, they are available for a larger sum of money and mostly used for major financial issues which can be repaid for an installment basis. If you want to fix your financial records, then it will be recommended that you talk to well known lenders in the industry that are offering these types of loans.
As a matter of fact, there are other factors that set the two loan options apart.
Loan processing period – payday loans can be processed faster compared to personal loans which only needs a day or two weeks. Due to the reason that it usually takes minutes for payday loans to be processed and the money can be deposited on the next business day after approval, they are sought after by borrowers who are in emergency situations.
If you’re facing the possibility of having your phone service or electricity suspended the next day, then applying for a payday loan can provide a resolution to your problem.
Repayment period – there are different methods of payment for personal loans including months, years to two years. By contrast, repayment period for payday loans can be as fast as a week however, payday loans have periods that could last to almost 2 weeks.
Co-signer or collateral required – personal loans most of the time are not requiring collateral for borrowers to be provided. As for some banks as well as credit unions however, they need borrowers to get first a creditworthy cosigner especially more so if they have bad credit record. While collateral or cosigners aren’t required in payday loans, there are some lenders that are requiring borrowers to show references alongside their bank information and employment records at the same time.
There is the so-called title lenders in which the payday lender provides loans to people in exchange of their car or house title. Despite the fact the fact that the borrower has ownership to their house or car, the lender can still keep possession of it until they have paid the money borrowed in full. If they fail to make repayments of the amount, then that is when the borrower will lose his or her asset.