Payday Loans vs. Personal Loans: What’s the Difference?

Payday loans and personal loans are two very different things, and it’s important that you know the difference. When you are looking for the very best loan opportunity, you will need to be aware of your options. Lots of people across the UK have started getting payday loans because of everything they have to offer. This article will closely examine these two borrowing options so you can make a decision that matches your needs exactly.

What is a Payday Loan?

Payday loans are usually for fairly small amounts that range from a hundred to a thousand pounds. They have short terms of around two weeks, which means that you can pay back the money you borrow with your next paycheque. These loans are given out almost exclusively by private lenders, most of which are based online.

What is a Personal Loan?

Personal loans are mostly given out by banks and credit unions. Just like with payday loans, they are usually for smaller amounts. The payback period varies depending on the lender you borrow from and the amount of your loan.


One of the big differences between a payday loans and personal loans has to do with your credit. Most people with bad credit can get a payday loan, but the standards are much higher with personal loans from a bank or credit union. Banks take a very hard look at a person’s credit history before deciding whether or not to approve their application. It is important to keep in mind that there are a few basic requirements that apply to both types of loans. You have to be over the age of 18 with a valid savings or checking account to get any type of loan in the UK. You must also make enough money to cover the full amount of loan by the due date. Lenders always ask for proof of income before they will even consider giving someone a loan. The unofficial requirements for getting a payday loan are far less stringent than with traditional bank loans. This is one of the reasons why personal loans have become so insanely popular across the UK.

Application Process

Applying for a payday loan is generally much less time consuming than a traditional personal loan that you’d get from a bank. This is because the private lenders that give out payday loans are mostly based online. You can complete one of these applications in well under an hour. Anyone who needs to get money for an important expense right now should apply online. It is by far the more expedient option available to borrowers.There are still many banks and credit unions that will require you to fill out physical paperwork to get a personal loan. This can take a lot of time and quickly become frustrating.

Getting Your Money

Payday loans almost always disperse funds to borrowers faster than personal bank loans. If you are approved for a payday loan, you could get your money in as little as three or four hours. It’s not uncommon at all for people who get payday loans to receive their funds the same day. If you were to get a loan through your bank, you could end up waiting a week or two for your money. Those who are in a time sensitive situation will want to go with a payday loan.


The interest rates or APR on payday loans isn’t always as high as many people think. In fact, there is a good chance that you could get a very reasonable deal. The key is to shop around and get quotes from various lenders. This is by far the most effective way to save money on your loan. Personal bank loans can come with some fairly steep interest rates, especially if your credit isn’t great. Payday loan lenders don’t care about your credit, so you won’t have to worry about that.

Should I get a Payday Loan or a Personal Loan?

There are numerous things to consider before deciding whether to borrow from a private lender or a bank. Private lenders offer some excellent overall deals on payday loans. It can be a real challenge to get a bank loan unless your credit is in excellent condition. Even people with really good credit are moving away from traditional personal loans because of how inconvenient they are. Before you decide on a certain type of loan to get, you have to consider your options. Payday loans have become a popular option in the UK, especially among those with low credit scores. If you need fast cash for an emergency expense, you will find that private lenders offer the most expedient borrowing option. The more time you take to consider these choices, the better of a decision you will end up making.

Choosing Between a Payday Loan and Instalment Loan

It is crucial that you have an intimate understanding of payday loans versus instalment loans so that you can make the right decision. There are many differences between these two borrowing options that you must be aware of before going forward. This article will enable you to choose the loan that best matches your specific borrowing requirements. If you are in a position where you need money for something, you will need to carefully review your options. The right loan can make all the difference when it comes to resolving your cash flow issues.

Basics of Payday Loans

Payday loans are typically given out by specific agencies or private lending companies such as Payday Loans Online. These businesses are not affiliated with any banks or credit unions, but rather they are their own entity. While not all payday loans are the same, most of them have a short term of about 2 weeks. Borrowing amounts range from £100 to £1,500. The larger the amount you borrow, the more time you will get to pay it off. A majority of payday loans are paid back in one payment on the due date.

Basics of Instalment Loans

 Instalment loans are paid back in regular payments, usually once per month. You can get one of these loans from a bank, credit union or private lending agency. They are typically obtained by those who need to borrow at least £2,000. Because these loans are unsecured (no collateral required), the interest rates tend to be high. These loans come with terms that range from one month to a few years.

Interest Rates

One of the biggest drawbacks of instalment loans is that the interest rates tend to be pretty high. And because most instalment loans have longer terms, you will end up spending more on interest overall. Payday loans can also come with high rates, but it’s much easier to find a good deal to save yourself money. The main reason that instalment loan rates are so high is because no collateral is required. You can reduce the amount of interest you pay by shopping around and looking for the right lender.

What Do You Need the Money for?

When you are trying to decide whether to get a payday loan or instalment loan, you will have to consider what you need the money for. If you have an urgent expense that needs to be paid right away, a payday loan is the way to go. Instalment loans, especially those obtained through a bank, can take a while to get. If you go through a bank or credit union for your loan, you might end up waiting weeks before you see any money.

How Much Money Do You Need to Borrow?

You also have to consider how much money you need to borrow. If you want to buy a car, an instalment loan is usually the right choice. It is still important to look into payday loans though. Some private lenders that give out payday loans will lend larger-than-usual amounts, depending on the applicant. Keep in mind that your income needs to be at a certain level to get approved. If the lender doesn’t think you make enough to pay back your loan by the due date, you won’t get it.

Your Credit

Instalment loans can be far more difficult to obtain than payday loans, simply because you usually go through a bank or credit union. These financial institutions have very high standards for borrowers. Private lenders on the other hand are much more flexible and reasonable in general. If you have bad credit right now, a payday loan is probably your best bet. Many payday loan lenders won’t even run a credit check on you. Look for “no credit check loans” when you are shopping around.

Your Finances

Taking out an instalment loan will require you to be very financially stable, simply because it will most likely be for a larger amount. Payday loans are short-term, so you don’t necessarily need to be on top of your finances to such an extent. You should still take a look at your finances to see if you can afford the loan. Only take out as much as you need to avoid defaulting on the loan later on.

Both instalment loans and payday loans have their places in the world of borrowing, but you will need to decide which one to go with. Payday loans are generally more versatile and suitable for a wider range of people than instalment loans. There are hundreds of private lenders that you can get a payday loan from, so you need to find one you can trust. This research will ultimately work in your favour. You never want to borrow any amount of money from a lender that you are completely sure of.