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Our goal at Credible Operations, Inc., NMLS Number 1681276, hereafter referred to as “Credible”, is to give you the tools and confidence you need to improve your finances. Although we promote the products of our partner lenders who pay us for our services, all opinions are our own.
If you need emergency money, you might consider taking out a personal loan or a payday loan. But only one of these options is worth considering. (Shutterstock)
When you need quick access to cash, you have several loan options, including personal loans and payday loans.
Personal loans are installment loans with lower interest rates than other credit products, making them a suitable option for many borrowers. In contrast, payday loans are short term loan which usually come with high fees. As a general rule, you should avoid taking out a personal loan and only consider them as a last resort.
Here’s what you need to know about the difference between personal loans and payday loans, and why you should proceed with caution before signing up for a payday loan.
Payday loans and personal loans are both unsecured loans that give you access to a lump sum of money after approval. But these loans are more different than alike. Here is a breakdown of the key differences between payday loans and personal loans:
With Credible, you can view your prequalified personal loan rates from various lenders, all in one place. And it won’t affect your credit score.
As with most loans, payday loans have pros and cons to consider:
You should avoid taking out a payday loan whenever possible. If you need money right away, you have other options, such as:
Personal loans are a cheaper alternative to payday loans. They usually come with lower interest rates and give you much longer to pay off your loan than payday loans.
If you need emergency money, personal loans from online lenders can take as little as a day to fund, and lenders can often approve your application within minutes.
Rather than taking out a personal loan, consider applying for a personal loan. Many online lenders allow you to prequalify without affecting your credit. If you don’t qualify for a personal loan, review your other options at this time.
Due to their high interest rates and fees and short repayment terms, payday loans can be considered a form of predatory lending.
Here are some predatory lender red flags to watch out for:
Payday loans almost always come with significantly higher costs and risks than personal loans. With a lower interest rate, longer repayment term, and larger loan amounts, a personal loan is a better option than a payday loan if you need emergency cash.
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