Payday loans or cash advance loans and bank loans are not the same thing, and it’s important to be aware of their differences. Before you sign anything and agree to accept a loan.
Payday Loans
A payday loan is a short-term high-cost solution for emergency cash. The effective annual percentage rate (APR) of a payday loan can be nearly 400 percent. That’s significantly higher than any personal loan that you could receive from a bank and traditional lending institutions. Typically, a payday loan has to be repaid within weeks through your paychecks.
Payday loans are designed for people that are cash-strapped and need money right away. If you don’t have a credit card or savings account that you can dip into, a payday loan may be your go-to solution, but it’s not the only choice that you have. One possible benefit of a payday loan is that it isn’t credit score sensitive, so it may be easier to qualify for if you have a bad credit rating.
Bank Loans
Many people don’t think of banks as a go to source for small personal loans. Banks take a long time to process a loan and are paperwork intensive. If you have time, personal loans offered through banks are a good option and the interest rates are significantly less than online payday loans. Most short-term personal loans have a fixed interest rate and repayment periods.
To approve you for a personal loan, the bank will check your credit history, and it could impact your credit score. As a rule, any negative affect on your credit score should be quite minimal.
Your interest rates will be largely determined by whether your personal loan is secured or unsecured. Secured personal loans have collateral, so the borrower enjoys a lower interest rate. Unsecured personal loans don’t require collateral. As a result, they have higher interest rates, which commonly range from 5 percent to 36 percent. As you can see, even the rates fluctuate significantly depending on lenders, credit score, and other factors.
Payday loans or merchant cash advances are frequently used for emergency expenses and are offered at smaller loan amounts. You can borrow more money with a personal loan, making it a better option for unpredictable emergency expenses.
If you want more details about personal loans, contact the financial experts at GetMoney.com. There are many installment loans online for bad credit. You should be able to find something that suits your needs.