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. What you must know is that, each follows a different set of arrangement. Payday loans are actually secured right on your next payday, hence the name. As a matter of fact, there are numerous payday lenders who are pleased to offer such service. You may be inclined in applying for such kind of loan but you ought to know that these come with bigger penalties and higher interests as well.
With personal loans on the other hand, it offers bigger amount or in other words, it can used for more of your immediate financial problems and can be paid in installment for a certain period of time. Reputable and well known lenders are offering both types of loans to assist you on your journey to fix your financial records.
As a matter of fact, there are other factors that set the two loan options apart.
Loan processing period – typically, payday loans are processed faster than personal loans which often requires days or two weeks at the most. Since payday loans are approved within minutes and that the loan is disbursed almost the next business day, they seem to be advantageous especially for borrowers who face urgent financial situation.
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 – personal loans do offer a number of repayment periods for their customers ranging from months, years to two years. By contrast, the repayment period for a payday loan can last for only a week but some can extend to a maximum of 14 days.
Co-signer or collateral required – most of the time, personal loans don’t require the borrowers to provide collateral. However, some credit unions and banks might be requiring borrowers particularly those who have poor credit history to get a creditworthy cosigner. 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.
Title lenders are the kind of payday lender that is providing loans in exchange for the title of the car or house of the borrower. Even though the borrower has submitted the title of their asset, the lender still has possession of it until they get to pay the full amount. The borrower is going to lose his or her asset in the event that they have failed to repay the amount loaned.