What is the Difference Between Payday Loans and Personal Loans?

Payday Loans

It is a short-term, high-cost loan that is granted to the people who are cash-strapped at the moment. Payday loans are usually made for small amounts, so they aren’t really the best choice for covering major expenses.

When applying for a payday loan, you will be inquired about your job status and sources of income. The lenders will also ask you your access to your checking account or submit a post-dated check to cover the amount of the loan, plus the additional finance fee, once your paycheck is added in your account. When applying for a payday loan, your credit will not be typically checked, so your credit score would not be impacted due to a payday loan.

It may look like a convenient option to get cash if you do not have savings or credit cards. But it is surely an expensive way to borrow. There is a huge risk in falling into the trap of payday loans because of the high fees and finance charges associated with payday loans. If you are really short on money or would not be able to pay back or cover the cost of the loan on your next salary day, the payday loan is not an ideal option for you.

Personal Loans

A personal loan which is short-term has a fixed interest rate and fixed repayment method. But, unlike payday loans, lenders do ask about your credit if you apply for personal loans and every loan inquiry can lower your credit score a bit.

If your personal loan is unsecured, or not backed by any collateral security, you have stuck yourself into a trap of high-interest loan as the lenders are prone to increase the interest rates in order to protect themselves against the borrowers who are not able to repay on time. Another disadvantage of personal loans is that, if you have a lower credit rating, you may get yourself stuck with a high-interest rate. On the other hand, it is easy to shop for personal loans and there is very less paperwork involved. Get a fast money loan from BC Loans.

Before looking for a personal loan, it is always the best practice to check your credit score. Once you know it, you can research among the lenders which loan option is suitable for your credit score and which one do you qualify for. Rather than applying for multiple personal loans, which would consequently lower your credit rating, it is highly recommended to apply for loans from one or two issuers you trust the most.

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