Tower Loan Blog

Payday Loans vs. Personal Loans: An In-Depth Guide

When you’re short on funds, you’re probably searching for convenient ways to get the money you need right now. If so, comparing payday loans vs. personal loans is a smart start. With that in mind, let’s review what a payday and personal loan are, how they are different, and which financial solution is right for you.

What is a Payday Loan?

Payday loans are usually offered as a short-term solution to financial emergencies. The majority of lenders offer two types of payday loans: unsecured and secured, which both have different requirements and terms. If you repay the loan on time and in full, there is no penalty for early repayment.

Payday loans are best applied to debts that need immediate and urgent attention. Some financial situations do not require you to contact a financial professional, but if you find yourself with an urgent problem that happened suddenly, and you need some quick cash to get through it, then fast cash payday loans are your solution.

The term ‘payday loan’ is a generic expression used by most providers marketing their loans to the general public. These same terms are most commonly used by banks and other financial institutions, but unfortunately, payday loans have a special meaning for the general public.

Payday loans are not the same as a traditional consumer loan from a bank or other lending institution. Consumers who borrow money from banks through personal loans, mortgages, or credit cards must start to pay back that money within approximately 30 days of receiving it. Banks will often set up monthly payment plans to spread out repayment over several months, or even years if necessary to prevent default. With Payday loans, though, repayments have to happen quickly and there are typically exorbitant interest rates on the money loaded.

In a nutshell, payday loans are a quick way to get cash in emergencies. But the interest rates you pay will be extremely high, and there might be other hidden fees that can end up costing you a lot of money.

What is a Personal Loan?

Now that you know the basics about payday loans, compare this information to a personal loan. As with any other kind of loan, there are specific requirements in place to ensure that you have a sound financial reason for taking out this type of loan. Read on to learn more about what these requirements entail. Some of these may be obvious, but others are things you might not expect.

All you need to do to get a personal loan is have a steady income. You won’t have to prove that you can pay back the loan or that there’s enough money in your account since the lender will do this for you automatically.

Lenders want to make sure that you will be able to repay the loan. You could get a personal loan with good credit, but it might not be funded as quickly as other types of loans, such as business loans. If your credit history is not sound, you might have a hard time getting approved for a payment plan with a personal loan.

It’s important to have enough money in your account if you are taking out a personal loan.

You will also have to be at least 18 years old to take out a personal loan.

Because a personal loan is an unsecured loan, your income will speak for itself when it comes to getting approved for one. The more you make, the higher your chances of getting approved for a personal loan. The lender will usually be able to determine how much you can qualify for based on the amount of income you are bringing in.

You will find that you have a better chance of getting approved for a personal loan if you’re a full-time employee. Working part-time and getting a personal loan won’t be near as easy because lenders are going to want to see that you have enough income coming in as proof that you can repay the full amount of the loan.

Payday Loans vs. Personal Loans

If you’re comparing personal loans vs payday loans, it can be easy to get overwhelmed by all the choices on the market.

But before you get carried away, consider that there are some important differences between both loans that may factor into your decision. These loans have vastly different characteristics and usages, so it is important to know some of these distinctions before making your choice—which also helps everyone avoid getting ripped off in the process.

The first thing that you should know is that the interest rates are different. While both have their advantages and disadvantages, payday loans were designed for those who have a poor credit score and have no collateral.

How do payday loans differ from other types of loans? Many payday loans have a maximum borrowing limit of $500-$1000. That’s a lot less than the personal loans (which may be capped at $5,000) that you can get from banks or credit unions. For this reason, most payday loans are repaid within two weeks. A bigger issue is applications: payday loans rely on a 36-hour approval process, while personal loans are approved within 24 hours for those in good standing.

What payday lenders have to offer is a short loan that can be used for urgent expenses. They are especially useful when you need quick cash quickly to make ends meet. As a result, many people who haven’t handled money before turn to payday loans because they are easy to get and quick to process. Lenders typically provide borrowers with the money they need, but if you don’t pay back the loan on time, they charge up to 25 percent per payment thereafter and a penalty fee once you have defaulted.

Ultimately, personal loans are safer than payday loans. The main advantage of personal loans over payday loans is that you will repay the principal plus interest in one payment. When these payments are made on-time, doing so can help improve your credit score.

Keep in mind, personal loans are secured loans, which means they are backed by collateral. This is why they have lower interest rates. There are also no hidden fees or surcharges with personal loans.

With a payday loan, the money you borrow is not backed by collateral and your credit score does not matter.

These loans have some high interest rates, typically around 300%.. Plus, you will have to repay both the interest and the principal (the amount you borrowed) in a very short time period.

Cash advance vs. Personal Loan

What are the differences between a personal loan vs cash advance?

A cash advance is when you apply for credit at an ATM, in most cases. The most popular type of cash advance is the payday advance, which most people think only happens on pay day. A personal loan would be when you apply for credit by phone or online, and then wait for your money to arrive in your bank account usually within days.

A personal loan is usually longer term. You may need to apply for credit well up to six months in advance of your bill being due. The interest rate on a cash advance is higher than what you would pay on a personal loan, but it’s virtually the same as applying for credit by phone or online at an ATM.

How to Decide If a Payday Loan or Personal Loan is Right for You?

Many people believe that personal loans are the best way to borrow money (and they’d be right!). That said, a payday loan can help you get much-needed cash when other types of loans simply won’t do. However, like with anything else in life, there are downsides to taking out a payday loan too — and these can come back to bite you in the future.

To find out if taking out a payday loan vs. personal loan is right for you, take a look at our quick guide below!

Can a Payday Loan Be Right for You?

When you compare loans, payday loans will allow you to borrow money quickly and easily, but they are limited to a certain amount and need to be repaid within a certain time.

Taking out a payday loan is an extremely easy way of borrowing money, but you will have to be very careful if you want to avoid paying any unnecessary charges and fees!

You should also be aware that payday loans tend to have higher interest rates than other popular forms of lending (which include personal lending packages available from brokers).

If you only need a small amount of money and don’t need to repay the money within the next week or so, then taking out a payday loan is probably right for you.

However, if you are looking for a more financially sustainable loan for something other than temporary financial difficulties (for example, if you need to borrow money for an ongoing business venture or to buy an item of furniture), it’s best to consider applying for alternative forms of lending such as a personal loan.

Choose Tower Loan

Assistance from Tower Loan could be the perfect solution for any financial needs that you may have. If you are looking for a personal loan, trust Tower Loan. We have over 80 years of experience and over 230 locations in Mississippi, Louisiana, Alabama, Missouri, Texas, & Illinois. And, with Tower Loan, your loan is completely guaranteed, and in most cases, with no collateral required!

We provide secured and unsecured personal loans to their customers that have low rates and low fees. Our loans are a fast and easy way to get money without the hassle of filling out a massive amount of paperwork.

Apply for a loan by completing the application on our website or by calling one of our representatives. Here’s how the process works:

When you apply for your loan, we will need some personal, financial, and employment information to provide an immediate decision on your loan application.

Once approved, we must verify your identity, income, and collateral (if applicable) as well as discuss your loan options.
Finally, you’ll need to sign documents (electronically if done online), then you will either receive your funds via direct deposit or by check (the check option is only available for in-person personal loans.)

Note: interest rates & APR for your personal loan will vary and are based on a variety of factors.

If you have any questions about Tower Loan personal loans, please contact visit us at www.towerloan.com or call your local branch.