Payday Loans versus Personal Loans
When you have an emergency, you want to know what options you have to obtain the funds fast. Whether you are experiencing a medical emergency, have emergency vehicle repairs or suddenly have debt collectors breathing down your neck, the need for immediate funds can be stressful. You typically have two options, a quick cash loans or a personal loan. While both quick cash loans can provide you with the needed funds, they have major differences. Payday loans are immediately granted and paid off within a very short amount of time, typically less than one month. The interest rate on these loans is often triple that of personal loans, sometimes reaching the triple digits. Personal loans are unsecured loans that are paid over a series of years on a monthly basis and have lower interest rates and no collateral.
Advantages of Payday Loans
Payday loans do have some advantages: they are characterized with a fast application process that is normally processed within 24 hours from the time of application; they do not require a credit analysis; and they are very quick to provide the quick loans needed. Payday loans are a good choice when time is of the essence to obtain funds. Unlike bank loans that can take weeks or even months to process, payday loans provide easy access to quick cash.
Many borrowers relish in the fact that payday loan companies do not take time to analyze your credit. The most important documents required for the application process are proof of employment and your bank account details, as most payday loans are directly withdrawn from your account according to your payday. Due to the fact this type of loan is usually done online or via phone it is considered to be very convenient.
Disadvantages of Payday Loans
Payday loans also have many disadvantages, of which its lack of cost effectiveness is the most important to consider. When it comes to making repayments for an acquired payday loan, it becomes quite expensive. The interest rates charged are excessive, sometimes costing you triple the amount you borrowed. Since issuing organizations of payday loans are not regulated by any financial operation or government entity, they often strictly offer high interest loans that you would never find at a bank. This makes the process of acquiring payday loans expensive.
Advantages of Personal Loans
Personal loans, otherwise known as unsecured loans, are obtained from a bank and require more stringent credit requirements in order to apply. The advantages of personal loans include lower interest rates and a longer repayment period. This enables you to pay the loan off over a series of years, in monthly payments, making it more affordable. In addition, personal loans are reported on your credit report, which means timely payments will help you to increase your score, enabling you to get other financing in the future. When you apply for a personal quick cash loan, you know ahead of time what your monthly payments will be, enabling you to decide if it is affordable and feasible for you to take on this loan.
Disadvantages of Personal Loans
There are a few disadvantages to person loans: the loan repayment period is much longer; late fees are charged should you miss a payment; and your credit determines whether or not you will get approved. If you are in financial distress and your credit has taken a hit, you might not be eligible for a personal loan. This could cause your financial distress to become even more complicated. If you do qualify for the loan, you are stuck with it for the next 3 to 5 years, which could be more than you bargained for regarding your monthly debts.
Payday loans and personal loans have their advantages and disadvantages. The right answer for you depends on your exact situation. Typically, payday quick loans are frowned upon, but in the crux of an emergency, it may be your only option. Make sure to shop around and know your options before making a decision.