The Key Difference Between Payday Loans & Personal Loans

Difference Between Payday Loans & Personal Loans

Personal loans and payday loans are useful if you need filling your pocket with cash urgently, but several factors make them different. Let’s look at the main difference between these two types of loans that can help people survive in their difficult times when salaries may not cover the monthly expenses.

  1. Eligibility
  • Payday loans are much more flexible than payday loans and lenders usually require borrowers who have a regular income.
  • Personal loans obtained by banks and credit unions with strict eligibility criteria. They need a good credit rating and solid financial experience from the borrower.
  1. Time
  • Payday loans have a short term of 2 to 4 weeks.
  • Personal loans have a minimum term of 12 months and may have a period of 7 to 10 years.
  1. Creditor
  • Payday loans are offered by lenders who specialize in short-term loans and verification services.
  • Personal loans are offered by banks, credit unions, online creditors and affiliated creditors.
  1. Cost 
  • Payday loans are usually much more expensive. Because of their short-term nature, the cost of payday loans may be relatively high compared to other types of financing.
  • Personal loans are typically cheaper than payday loans with fixed interest rates between 6% and 36%, but you must have good credit.
  1. Loan amount
  • With payday loans, one can borrow from $50 to $1,000, some lenders offering loans of up to $5,000. If you are actively looking for a loan to cover higher costs, a payday loan may not be the ideal choice for you.
  • With a personal loan, one can borrow up to $100,000, although most lenders only offer around $50,000 to unpaid credit borrowers.

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