Unlike other traditional loans, payday loans and personal loans have no restrictions in terms of where the money lent is to be spent. Although there are some similarities, these loans are nothing alike. Each one is designed to suit a specific purpose based on one’s financial needs.
Finding the right loan option can help save time and money. So to learn more about what short-term loan would be more suited to your needs read on!
Payday loans are short-term unsecured loans that require no collateral and have a term period of a maximum of 62-days in most provinces in United States. These loans are used to finance small purchases and expenses. The maximum loan amount that can be borrowed from a payday lender is set at $1,500 in most places in United States.
The amount that lenders can charge on loans issued is subject to provincial regulations. In most cases, these loans have a fixed cost associated with them and are not percentage or interest-based.
The amount borrowed is to be paid back in full along with any associated charges on the next paycheck. These loans are designed to be repaid quickly, usually within two weeks.
Even though a personal loan is considered short-term, these loans can have term periods of anywhere from 2-5 years. Unlike payday loans, personal loans or installment loans have a longer payback period and higher loan amounts.
Personal loans are also unsecured and as such require no collateral in exchange for the lent amount. Most online lenders will lend up to a maximum of $15,000 for an unsecured personal loan. Even though some online sources promise approval within 24 hours, personal loans can often take days or even weeks to be approved.
Personal loans are much harder to secure than payday loans as they often involve credit checks and background checks. Those that have bad credit or have a record are unlikely to be approved for a personal loan.
The borrowed money can be used to fund larger purchases such as going on vacation, paying off high-interest debt, or paying for home renovation. Similar to payday loans there is no restriction on where the money is spent.
Personal loans are generally also less expensive in terms of the cost of borrowing. Interest can be quite minimal depending on your credit history making these loans a lot more appealing for those looking to borrow sums of $2,500 or more.
It is important to remember that both these loan types are vastly different and as such come with their own set of unique pros and cons.
Both options have their benefits, and it can be hard to decide which is right for you. To point you in the right direction here are the unique benefits of each:
This type of loan is the best choice for those that are looking for small amounts of cash, urgently. For anything under $1,500, this is your best option.
These loans have fast processing times and access to funds is provided in less than an hour in most cases. Applying for the loan also doesn’t require any extensive paperwork. All that is required is that the borrower is of legal age, has a valid ID, a valid bank account, and proof of steady income.
In fact, payday loans have the most lenient eligibility requirements out of any other type of loan service. Those that are unemployed and on non-employment income can also qualify for this loan. Those with bad credit, no credit, or a criminal record are all eligible to apply.
In terms of convenience and ease, nothing beats payday loans for short-term cash. As long as you are sure you can pay back the loan along with the associated fees in the agreed time period these loans can be an easy and efficient way of dealing with short-term financial troubles.
Personal loans offer their own set of benefits. Whether it is a personal loan from a traditional bank or credit union or an installment loan that is secured online, these loans generally have a much lower cost of borrowing than payday loans.
The amount borrowed is also much higher which means you have more money to aid with finances and a much longer duration to pay it all back. Even though personal loans from traditional sources can take long periods in order to be approved, installment loans that are readily available online can be approved in under 24 hours depending on your current financial standings.
For those wanting to borrow amounts of over 2,500 installment loans are the best option. They have quick processing times, no collateral requirements, more lenient eligibility requirements, and longer payback duration’s.
Deciding between a payday loan or a personal loan shouldn’t be that hard of a decision. If the need for money is urgent and the amount needed is relatively small, payday lv loans are your best bet. However, if you are able to wait and need money to pay for a larger expense or purchase, securing a personal loan may be in your best interest. These loans come with no strings attached and have lower interest rates and longer payback periods than payday loans.
Don’t forget! Before securing any type of loan, always read up on provincial regulations surrounding that loan type. Knowing what the regulations are will give you a great idea as to whether the loan you are getting is worth it or if you are overpaying.