Comparing Instant Payday Loans And Personal Loans
Payday loans are for those times when you need cash in an emergency. They get approved very fast and do not require much by way of documentation. But the interest rates of these loans are very high and therefore, the borrower has to be careful about repayment of payday loans.
Personal Loans
Personal loans are of two kinds – Secured and unsecured personal loans. Of these, unsecured loans are the most popular as they are easily available. These are short term loans and can be availed in time of emergencies when you do not have any savings to tide you over the cash crunch. But to avail these loans, the borrower has to undergo a credit check like any other loan. A proof of income will also be required. Therefore, check your credit report before applying for a personal loan.
A secured Personal loan is when you are putting up a collateral to avail the loan. With the collateral, you can get the loan approved at low interest rates. The disadvantage of a personal loan is that, your credit report has to be in good condition so as to enable you to avail yourself of these loans. Also, though the rejection of the loan will not harm your credit score, if there are too many applications for personal loans, your credit score is harmed, each time your report is pulled for credit check.
Instant Payday Loan
As opposed to Personal Loans, Payday loans are instant loans that you can avail in times of emergency. These loans do not require any credit check and are approved with the minimum fuss. The criteria for availing these loans is that the borrower should be over 18 years of age, should be able to provide with an income proof and bank details. When he meets these requirements, the loan is approved within 24 hours.
Payday loans, as the name implies, are required to be repaid during the next payday. When borrower gives the bank details to the lender, he also authorizes him to withdraw payment at the scheduled time. In some cases, the borrower is required to give the lender a post-dated check. He is then given the loan after deducting the interest amount.
Though these loans are of great help during times of emergency, the biggest disadvantage is the high rates of interest. If your check bounces or if repayment is not made in time due to shortage of funds, then the borrower can be in a two-way trouble. For one, the bank will report the bounced check to the credit bureau, thereby ensuring that the fact is recorded in his credit history and the second is that the borrower will have to pay the payday loan lender enhanced rates of interest.
This is the reason, why borrowers prefer personal loans. If used wisely, payday loans can be very helpful in times of need. Therefore, use your loan wisely and be sure to repay it on time so as to avoid heavy penalties.