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Difference Between Payday Loans and Personal Loans

A lot of people mostly think that personal and payday loans are just the same or to say the least, very similar. What you must know is that, each follows a different set of arrangement. Generally, payday loans are secured on your next paycheck and short term. The payday lenders are very eager to offer this solution to their customer’s financial woes. These loans however come with bigger penalties and higher interests.

Personal loans on the other hand are often for a bigger amount meaning, they can offer a solution to your immediate financial problems and paid in installment over a period of time. Well known and established lenders offer these loans to assist you on fixing your financial records.

As a matter of fact, there are other factors that set the two loan options apart.

Loan processing period – payday loans can be processed faster compared to personal loans which only needs a day or two weeks. Due to the reason that it usually takes minutes for payday loans to be processed and the money can be deposited on the next business day after approval, they are sought after by borrowers who are in emergency situations.

If you face the possibility of your phone service, electricity suspended or whatever reason and you don’t have the money to pay for it, payday loans are proven to be a good solution.

Repayment period – there are different methods of payment for personal loans including months, years to two years. By contrast, repayment period for the payday loans could be as quick as one week although, a lot of payday loans have periods that can last closer to 14 days.

Co-signer or collateral required – in most cases, personal loans are not looking for any collateral on the part of the borrower. On the other hand, some credit unions as well as banks may need borrowers especially those who got bad credit history to find a creditworthy cosigner. Payday loans however don’t require any collateral or cosigners in the process but there are payday loan lenders who might demand a list of references from the borrower together with their bank information and employment records.

There are also title lenders that you can find offering their service; this is basically a kind of lender who does provide loans but in exchange for the borrower’s car or house title. Although, the borrower still has ownership to their car or house but, the lender is going to keep the title until they have fully paid the borrowed money. If they fail to make repayments of the amount, then that is when the borrower will lose his or her asset.

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