If you need to borrow money, you have several possibilities. For example, if you believe you will be able to repay what you owe with your next paycheck, you may want to consider obtaining a simple payday loan for small sums of money. However, the decision between a personal loan and a payday loan online is dependent on a number of criteria, including your capacity to repay the loan within the timeframe specified.
Payday loans online and personal loans share the same key qualities as all other loan types. Money is borrowed for a set period of time at a fixed interest rate and must be repaid by a specific date.
Key Points:
A payday or personal loan might help you get through an unexpected financial emergency.
Personal loans require an application but have lower interest rates and a generous repayment period.
Payday loans might be problematic for borrowers who are unable to repay them on time due to late fines.
How Payday Loans Work?
Payday loans, also known as cash advances, are short-term loans typically meant to cover expenses until the borrower's next payday. Borrowers can apply for payday loans either online or in-person at payday loan storefronts.
Approval for payday loans is often swift, with funds disbursed directly into the borrower's bank account within one business day. Repayment of payday loans is typically due in full on the borrower's next payday.
How Personal Loans Work
Personal loans are unsecured loans offered by banks, credit unions, or online lenders. They are typically used for various purposes, such as debt consolidation, home improvements, or unexpected expenses.
Borrowers apply for personal loans through financial institutions or online lenders. Approval for personal loans may take longer than payday loans, with funds disbursed within a few days to a week. Personal loans have fixed monthly payments over a specified term, typically ranging from one to seven years.
The Bottom Line
Payday loans are typically more expensive than personal loans. They can also be risky, as additional fees might raise the amount to a point where it is difficult to repay promptly.
Even for small loan amounts, a personal loan is typically a preferable borrowing alternative.
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