Personal Loan vs Payday Loan: The Differences to Remember

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Less than half of Americans can pay for an emergency that costs $1,000 or more.

To remedy this, many take out loans to cover the cost of unforeseen emergencies or accidents. This leads to more financial stress and worry because you don’t always know which loan is best.

If you’re thinking about taking out a loan, here’s a handy guide to the differences between a personal loan vs. payday loan.

Why Take Out A Loan

Taking out a loan isn’t an easy decision to make, there are times when it may be necessary. Here are some reasons why people decide to get a loan:

  • Emergencies
  • Catch up on bills
  • Pay for medical bills
  • Home repairs
  • Education
  • Debt consolidation
  • Vacations, wedding, or other major life events

While these are some of the main reasons why people turn to loans, it’s not an exhaustive list. Getting a loan can be a very personal decision and both personal loans and payday loans are great choices.

Personal Loans

So what is a personal loan? A personal loan is just one of the many loans you could apply for. Here are some reasons why a personal loan might be right for you.

Above all, personal loans are very flexible. They meet personal needs like debt consolidation, paying for life events, cars, or home repairs. They’re not like a mortgage loan, where it has a specific need.

When you apply for a personal loan you’ll likely need a credit score of 600 or better. Some lenders will allow you to borrow but at a higher interest rate. The life of a personal loan can be anywhere from a couple of years to five or six years, and the amount borrowed a couple of thousand dollars to over $10,000.

Personal loans do have some caveats, but otherwise, they’re easy to acquire and have a fixed payment. You’ll need proof of income, a credit score, and you’ll need to know how much to borrow. Here’s a better understanding of how you can get approved for a personal loan.

Payday Loans

What is a payday loan? In comparison, payday loans are a quick way to get cash, but they come with some higher stakes.

The amount you can borrow is much smaller, between $500-1,000, and are typically used why you’re in a pinch for money. They’re not a solution to a long-term problem.

You will need to pay a payday loan back in two weeks to 30 days. One of the advantages of payday loans is that there’s no credit check, so if you need the money and have lower credit, it might work for you.

However, the interest rate is extremely high, 400% or higher, so you’ll need to ensure that you can pay everything back quickly. If you cannot, it’s possible to trap yourself in more debt by rolling over the loan.

Personal Loan vs. Payday Loan

When you’re deciding between a personal loan vs. payday loan, your main focus should be the loan’s purpose. Once you understand why you need the money, you’ll make the right choice.

Are you looking for more financial tips? Visit our page today to find out how to deal with finances in a variety of situations!

About Author

LaDonna Dennis

LaDonna Dennis is the founder and creator of Mom Blog Society. She wears many hats. She is a Homemaker*Blogger*Crafter*Reader*Pinner*Friend*Animal Lover* Former writer of Frost Illustrated and, Cancer...SURVIVOR! LaDonna is happily married to the love of her life, the mother of 3 grown children and "Grams" to 3 grandchildren. She adores animals and has four furbabies: Makia ( a German Shepherd, whose mission in life is to be her attached to her hip) and Hachie, (an OCD Alaskan Malamute, and Akia (An Alaskan Malamute) who is just sweet as can be. And Sassy, a four-month-old German Shepherd who has quickly stolen her heart and become the most precious fur baby of all times. Aside from the humans in her life, LaDonna's fur babies are her world.

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Adam
Adam
5 months ago

Thank you very much for these explanations. I often confused similar terms and did not always understand the difference. You know good personal loan providers who can give large sums at small interest rates

Alice Bloss
Alice Bloss
4 months ago
Reply to  Adam

Yes, I had such a situation when I urgently needed money and I could not do anything to find it. I was very lucky to find this service “https://zebrafinance.com/oklahoma-ok” which was able to help me pay for the purchase of a car for which there was not enough money. I returned the debt to them in a few months and was left with very pleasant impressions.

Maria Kendall
Maria Kendall
4 months ago

GREAT TESTIMONY ON HOW I GOT MY LOAN 
I have a very important message to share with everyone/anyone in need of a loan from a genuine lender. I’m happy to share this note with everyone after what myself and my wife went through in the hands of some pathetic hoodlums claiming to offer some sort of loans. It’s very difficult to get a genuine lender and thanks be to Mrs. Michelle Loan firm who helped me, my families and friends without having to fork out money for unending fees. Contact [email protected]
 Or WhatsApp them : +1(470) 485-4938

Maria Kendall
Maria Kendall
4 months ago

GREAT TESTIMONY ON HOW I GOT MY LOAN 
I have a very important message to share with everyone/anyone in need of a loan from a genuine lender. I’m happy to share this note with everyone after what myself and my wife went through in the hands of some pathetic hoodlums claiming to offer some sort of loans. It’s very difficult to get a genuine lender and thanks be to Mrs. Michelle Loan firm who helped me, my families and friends without having to fork out money for unending fees. Contact [email protected]
 Or WhatsApp them : +1(470) 485-4938