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Many people think that personal loans and payday loans are one and the same thing. This is not true. In fact, there are some big differences between the two types of loans and these are discussed below.

Differences Between Payday and Personal Loans

A payday loan is a cash advance that is meant to bridge the gap between the current financial situation and the next pay day. Payday loans are generally short term and are usually secured against your next paycheck. Lenders are always ready and willing to offer cash advance to people since these loans attract high interest rates. Still, payday loans are usually given out in small amounts.

Personal loans, also referred to as unsecured loans, are usually given out in big amounts of money. This type of loan can offer a solution to many of your current financial problems. Personal loans are paid back in installments over a longer period of time.

Aside from the main differences between payday loans and personal loans, there are also others that set the two aside:

  • Payday loans are usually processed quickly, while personal loans can take a couple of days or even weeks for them to get processed.
  • Personal loans carry repayment periods that range from several months to even years, but the repayment period for a payday loan can be as short as one or two weeks.
  • Personal loans do not ask for any collateral. But some lenders may ask people with poor credit score to obtain creditworthy co-signer. Payday loans do not require co-signers.

The Top Benefits of Payday Loans

If it is in middle of a month and you are facing some financial difficulties, a payday loan is the way to go. Below are some of the benefits you will accrue if you apply for a cash advance.

  1. Easy to apply and qualify. It is easy to apply and qualify for a payday advance. This is because the only qualification is having sufficient income to repay the cash advance, and you have never defaulted on another cash advance in the past.
  2. Your information is secure. When applying for payday loans, your personal and banking information is very usually very secure. This is because the payday loan lenders do not disclose the information to third parties.
  3. Quick loan application and approval. Actually, filling out the loan application form only takes a few minutes. Approval is also quick and you are likely to get cash in your bank account in less than 24 hours.
  4. Flexibility. Note that payday loans are short term. This means you can pay back easily after you get your next check.
  5. Convenient. Unlike other types of loan lenders, payday loan lenders are open outside of the regular banking hours. This allows you to obtain emergency cash loans at any time. Also, online payday loan lenders make the whole process much easier.

Benefits of Obtaining Personal Loans

Personal loans do offer a myriad of benefits to borrowers. Below are some of the most important ones:

  1. Flexibility of use. Actually, personal loans can be used for various types of purposes. For example, you can use the money to cater for medical bills, fund your wedding, pay school fees, remodel your home, and do many other things.
  2. Quick availability. In fact, obtaining a personal loan is quite easy. In most cases, you can get the loan even within 24 hours. So, if you are looking for emergency funds then a personal loan is the way to go.
  3. Minimal documentation needed. In normal circumstances, personal loans do not need much documentation as compared to home or car loans. Thus, the processing time is quicker.
  4. No collateral needed. No security needed to obtain this type of loan. That is why the loan is referred to as unsecured. Thus, your assets are safer.

The decision of whether to apply for a payday loan or personal loan is solely yours. If you go through the pros for both types of loans, then you will get enlightened and know which one suit you best.

 

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