Personal Loan or Payday Loan?

ElitePersonalFinance
Last Update: February 13, 2021 Loans

If you are in urgent need of a cash loan, there are basically 2 types of loans you can consider. One is known as a payday loan, and the other is known as a personal loan.

The difference between the two is quite substantial. Personal loans offer up to $100,000, and their APRs are capped at 5.99% to 35.99%. Payday loans offer less than $1,000, and their APRs average at 400%.

Here are the features of both payday and personal loans if you are undecided.

Payday Loans

Many people looking for quick cash in the form of a short-term loan will mostly opt for a payday loan. Some info on the payday loan system is noted here:

  • Payday loans are unsecured and require no collateral.
  • Provided that you can confirm proof of employment, produce payslips, and Identify documents, approval is guaranteed. In most cases, cash is paid out on the same day.
  • Payment is made from the customer’s next paycheck. Some lenders ask for a post-dated check, including the interest and other charges.
  • The loan period is generally from 15 to 31 days. US law dictates that there has to be a 10 day waiting period before you can take out another payday loan.
  • Payday loans are expensive, with an average of 36% to 40% APR the norm. This does not include any processing charges, which will be extra.
  • For example, payback on a 30-day loan of $600 could cost you $676 plus charges, which is around $2.50 per day.
  • Payday loans cannot be classed as scams. If a company can give details of how much you are borrowing, how much you will be paying back, and the date on which payback is required, then technically, it is not a scam.
  • Be sure to get a proper contract with all the details to know exactly how much the loan is costing you.
  • Although the loan is unsecured, it has to be paid back at the stipulated time, or penalties will apply. It would help if you also were sure how penalties would be structured and calculated.

If you are in urgent need of cash to meet your commitments, then a payday loan, also known as a cash advance, maybe of some benefit to you. However, bear in mind that some states do not authorize payday loans. Among them are Connecticut, Maryland, Massachusetts, Pennsylvania, Vermont, West Virginia, and the District of Columbia.

Personal Loans

Sometimes you need extra money because everyone needs a little help now and then. Whether you need finance to cover medical bills, want to make a major purchase like a holiday or a new appliance, perhaps invest in some home improvements, or fund some unexpected expenses – a personal loan is a good way to go.

A personal loan is an unsecured loan, enabling you to borrow money with no collateral, based on your affordability and your credit score. Personal loans are a popular choice because interest rates are lower than credit cards and can save you thousands of dollars.

You could use a personal loan to consolidate debts into one lower, more affordable monthly payment. Competitive rates are now around 7% APR, saving you money and possibly enabling you to pay off your debts faster.

Most personal loan companies will offer you a loan ranging from $5000 to $40,000 depending, of course, on what you qualify for, with various payback terms. There are plenty of companies out there all competing for your business, and like anything to do with finance, scammers are also lurking in the shadows waiting to defraud you. Protect yourself by always dealing with well-known reputable companies and not those offering crazy deals. You will be on the losing side if you deal with them.

Best Personal Loans

ElitePersonalFinance is a top-rated site whose mission is to help people make better financial decisions. We intense investigations into most companies involved in the finance business and recommends only those proven to be absolutely reliable. No company with even a hint of scamming gets as much as a foot in the door.

Listed here are 3 legitimate, reputable personal loan companies:

Santander Bank

  • Loans from $5000 to $35,000 are available based on affordability and credit score.
  • Competitive interest rates – plus rate discount if automatic payments are set up.
  • Fixed interest rate and no annual fee.
  • No collateral required, no application fee.
  • Up to 60 months to pay, predictable monthly payments.
  • An innovative new company that offers an alternative to traditional loans.

LendingTree

  • You will be contacted and get up to 5 loan offers in 5 minutes.
  • You can complete an online loan request on the LendingTree site and receive offers from multiple lenders.

LendingClub

  • The LendingClub is the world’s largest online marketplace connecting borrowers and investors.
  • The interest rates are less than traditional bank lending programs.
  • Personal loans are available up to $40,000.
  • They advise various personal loan solutions, from debt consolidation loans to pay off credit cards.
  • Apply online in minutes and get funded if you qualify in just a few days.
  • Make fixed payments with a fixed interest rate.
  • The LendingClub also offers investment facilities with solid returns.
  • Based in San Francisco, this company is reported to have made nearly $100 million last year and is growing all the time.

Some Further Advice from ElitePersonalFinance

  • Unless you are in dire financial straits, do not go for a payday loan. You could end up in a debt spiral that will not be easy to escape from.
  • Personal loans are a better option if you qualify.
  • If you have a poor credit score, get some help and advice to get it back up to speed.

Always comprehensively research lenders who want to do business with you. Opt only for those who are absolutely reputable and legitimate, with good, authenticated reviews.

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