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.


Requirements

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.


APR

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.

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