Payday Loans vs. Personal Loans: What’s the Difference?
When people go through a financial emergency they often look to borrow a quick loan that will help them overcome their challenges and start anew. But there are many types of loans out there and it’s important that you make the smartest possible financial decision on which one to get.
Here, we will review the differences between payday loans and personal loans, two very common types of loans that could help you get back on your feet during rough times.
What You Need to Know About Payday Loans
Personal loans are similar to payday loans in that they are unsecured so there is no collateral involved for getting these loans. Sometimes lenders offer to put collateral up for a personal loan and in that case the interest rate will be lower. Another factor that could improve the personal loan terms you receive is having a good credit score.
Personal loans can be used for whatever you’d like, including to cover debt or or pay for a medical procedure. The choice of what to do with the money is entirely yours. Personal loans vary widely in their length and loan amounts. These will depend on your state of residence, lender of choice, and personal portfolio. Make sure to discuss the small details of the loan with your lender so that there are no surprises once you’ve taken the loan.
What You Need to Know About Personal Loans
Similarly to title loans, payday loans are also considered secured. But instead of using your vehicle as collateral, these loans are secured by a postdated check or debit authorization. These loans are meant to be short-termed and provide quick relief until your next payday.
The interest rates for payday loans are also considered high and vary, amongst other things, on the state in which you reside and the lender you choose. These loans are available in much more states when compared to title loans.
Comparing Between Payday and Personal Loans
Payday loans and personal loans can be used for much of the same reasons and it may very well be the case that a customer finds that both are fitting for their situation. So how do you know which is the right fit for you?
First, remember that a payday loan is usually taken out as a short term solution and is meant to be paid back within a few weeks at most. A personal loan, on the other hand, could be taken out for much longer, and sometimes be paid back over a few years. Personal loans also have lower interest than payday loans and allow you to borrow more money.
Given this, customers who are looking to consolidate debt, for example, may prefer the personal loan since it allows them to slowly pay it back and avoid higher interest. Customers who are looking to get quick emergency loans to cover small things such as plumbing issues or overdue bills may prefer the payday loan option for fast financial relief.
Are These Loans a Good Idea?
Many people ask themselves if getting a payday loan or personal loan is a good idea. The answer is that it depends on your personal situation. These loans do have high interest and should only be used as a last resort but if you have nowhere to turn to and need money urgently, they could provide a great solution. What could be a wonderful financial decision for one customer could be equally bad for another so make sure to weigh all your options and discuss your concerns with a qualified loan representative.
How 5 Star Loans Can Help Me
If you’ve decided that a personal loan or payday loan could be the right option for you, let 5 Star Loans help you through the process. We understand that people go through rough times in which they need some financial assistance of this kind and we’re here to make it as easy and smooth as possible.
We are happy to provide an online inquiry that allows you to get started with your loan application from the comfort of your home. We hope this will spare you time, money, and energy by saving the drive to a lender and the long paperwork that many of those require. Our professional loan agents are happy to help throughout the process and look forward to answering each and every single question you have. There is no rush to sign anything and there is no need to feel obligated to accept any loan offer. Remember, we are here to help you make the right call for you.
If you would like to learn more about our payday and personal loans, or if you have any questions, give us a call today.