Should You Get a Personal Loan or Payday Loan When Money is Tight
If you have run out of cash before your next paycheck has come, don't lose heart. 58 percent of borrowers have difficulty paying all of their monthly bills and expenses. People are usually able to skate by, paying a little here and a little there, but trouble arises when emergencies show up and you have just enough cash to get through the week.
When you are out of cash and your next paycheck isn't for a week or two, you may consider pursuing approval for a loan. But not all loans are made equal. Would a payday loan or a personal loan better suit you? The answer often depends on your personal situation, but here are some guidelines to help you decide.
Choosing Personal Loans
Personal loans are intended for personal spending and can be approved both online and through banks, without any collateral whatsoever. Online installment loans, for instance, offer instant approval without requiring a home or automobile as collateral.
In order to be considered for a personal loan, you must submit proof of income and tax returns as well as pay stubs to lenders. They will also pull your credit score to determine the rate at which they can offer you a loan. You will then pay the loan back over months or years, depending on the agreement you sign with the lender.
The process of getting approved for a personal loan takes a couple of days.
Personal loans typically have lower interest rates than payday loans, which makes them a great option. You can also use personal loans to pay off debts, which makes them a good option for people who have debt problems. But in some cases, personal loans may have higher interest rates than an average credit card, depending on your credit score, which may make it less than ideal for your situation. A lower credit score may land you higher rates.
Payday loans are intended to help people bridge the financial gap between the point when they realize they don't have enough money until payday arrives. These loans are high-interest and are meant to be paid off at the next payday (or beyond that for a fine).
Lenders usually look at the income status of a borrower as well as their bank account to determine how much money a loan can be set for. No credit score or history is required to obtain one of these loans, making payday loans a good option for those with low credit scores.
Payday loans are typically processed faster than personal loans, getting you money in your pocket more quickly.
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