Guaranteed Loans Now!

What makes payday loans different from other types of loans?

There are many differences between payday loans and other kinds of loans, and it’s important that you know what they are if you are interested in getting one. The more time you take to look over this information, the better your chances will be of making a good final decision.

Payday Loans vs. Personal Loans

Loan Processing Period
While a payday loan is usually processed the same day or the day after the application is filed, a personal loan can take up to two weeks to be fully processed and approved. One of the main reasons that so many people seem to favor payday loans is because the funds are usually released right away, which can be extremely helpful for those in an emergency financial situation. Those who are in danger of having their electricity turned off in the near future because they can’t pay their bill will most likely want to opt for this type of loan.
Interest Rates
You will find that the interest rate for payday loans is usually extremely high. The average APR for these loans is around 33% per loan, so, over 1000% per year. Some credit unions as well as personal lenders offer personal loans that distribute funds as fast as payday loans, except they have far lower interest rates. The interest rate of a personal loan depends on the credit on the individual borrower, but they are typically much lower than payday loans.
Repayment Period
If you take out a personal loan, you will have anywhere from several months to a couple of years to pay it back. The repayment period for payday loans, however, is much shorter. With these loans you will probably have around two weeks to pay back the amount you borrow, though it does depend on a number of factors. Payday loan lenders usually allow borrowers who are unable to repay their loans in full to review them at the end of the pay period by making a single payment that covers part of the full amount owed. Studies have shown that it takes the average payday loan borrower around 5 months to pay off the loan in full.
Credit Check
Another difference between payday and personal loans is that the former type typically doesn’t require a credit check. One of the most attractive things about these loans is that they are available to almost anyone, even those who have very poor credit or no credit at all. Personal loans on the other hand require credit checks, and not everyone is approved for them. Payday lenders are one of the very few options that people with bad credit have, simply because there is no credit check required. These lenders are not required to report any information back to credit bureaus about the loan you get from them.
Co-Signer Requirement
Most people typically do not need to put up any collateral to get a personal loan, though certain banks and credit unions may require borrowers with especially bad credit to have someone with good credit co-sign on their loan. The co-signer would be responsible for paying off the remaining balance of the loan in full if the borrower is unable to do so for any reason at all. Payloan loan lenders do not require co-signers, though some of them may require borrowers to provide them with references as well as employment and bank details.

Which type of loan should I apply for?

When making the decision of whether to apply for a personal or payday loan, it is important that you take the above differences into consideration. You will ultimately need to ask yourself how quickly you need the money and how much you need. It is also important to consider that payday loans typically come with a very hefty interest rate, but they can be a good option for those with very poor credit.
Benefits of Payday Loans vs. Personal Loans:

  • Much faster processing period
  • You get the funds you need almost instantly
  • Small to no credit check may be required
Drawbacks of Payday Loans:

  • Much higher interest rate
  • You won’t have as long to pay back the money you borrow
  • You can’t borrow as much as with a personal loan

Payday Loans vs. Title Loans

You will find that title loan stores operate in just 25 states in the U.S., so they are not available everywhere. And while there are quite a few similarities between these two types of loans, there are also a number of differences to look at.
Interest Rate Charged
The average annual interest rate charged on payday loans is around 400%, whereas the average interest rate charged on title loans is about 300%. With title loans, you take your vehicle to an auto title lender, and the lender determines the overall value of your office and offers you a loan for a percentage of the vehicle’s value.
You hand over the title of your car to the lender as collateral in case you cannot pay the loan. With a payday loan, there is absolutely no collateral required.
Credit Checks
One of the biggest benefits of both title and payday loans is that a credit check is usually not performed with either one. While this depends on the borrower, a credit check is not considered to be standard for these types of loans. But this still remains at lender discretion in each case, and they may do a basic check if they need it.

Which type of loan should I apply for?

While a title loan may come with a little bit lower of an interest rate, it will require you to turn your vehicle over as collateral. A payday loan will come with a higher rate, but no collateral is required. Both types of loans typically process quickly, so you will ultimately need to decide which one is right for you.
Benefits of Payday Loans vs. Title Loans:

  • No collateral required
Drawbacks of Payday Loans:

  • Higher interest rate
Before you decide which type of loan you want to apply for, it is important that you take all of this information into consideration. When you take the time to consider all of your options and weigh the pros and cons, you will be able to avoid making huge mistakes.