When to Apply for Personal and Payday Loans?
As a matter of fact, numerous people think that payday loans and personal loans are similar but it is far from reality. What you must know is that, each follows a different set of arrangement. Generally, payday loans are secured on your next paycheck and short term. The payday lenders are very eager to offer this solution to their customer’s financial woes. You may be inclined in applying for such kind of loan but you ought to know that these come with bigger penalties and higher interests as well.
Personal loans on the other hand are often for a bigger amount meaning, they can offer a solution to your immediate financial problems and paid in installment over a period of time. Well known and established lenders offer these loans to assist you on fixing your financial records.
As a matter of fact, there are other factors that set the two loan options apart.
Loan processing period – if you need faster processing time, then it will be recommended that you opt for payday loans which can be processed within a day or at maximum of two weeks. Due to the reason that it usually takes minutes for payday loans to be processed and the money can be deposited on the next business day after approval, they are sought after by borrowers who are in emergency situations.
Say for example that you face the probability of suspending your electricity or phone service or any urgent financial situation, then a payday loan can be a great solution for it.
Repayment period – personal loans do offer a number of repayment periods for their customers ranging from months, years to two years. By contrast, the repayment period for a payday loan can last for only a week but some can extend to a maximum of 14 days.
Co-signer or collateral required – most of the time, personal loans don’t require the borrowers to provide collateral. On the other hand, some credit unions as well as banks may need borrowers especially those who got bad credit history to find a creditworthy cosigner. As for payday loans, they don’t need collateral or cosigners but some lenders may be demanding borrowers to show them list of references from the borrower along with their employment records as well as bank information.
There is the so-called title lenders in which the payday lender provides loans to people in exchange of their car or house title. Although, the borrower still has ownership to their car or house but, the lender is going to keep the title until they have fully paid the borrowed money. If they fail to make repayments of the amount, then that is when the borrower will lose his or her asset.