Personal loan

Payday Loans vs Bank Loans: An Insight

Payday loans and bank loans are not the same thing, and it’s important to be aware of their differences. Before you sign anything or agree to a loan, you should be aware of what it entails and what options you have available.

Payday Loans

A payday loan is both a short-term and high-cost solution. 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 might receive from a bank. Typically, a payday loan has to be repaid within weeks or months. 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 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 your credit often isn’t checked, so it may not impact your credit rating.

Bank Loans

Many people think of banks when it comes to giving out home loans or business loans, but there’s much more that a bank can do for you. Personal loans are frequently used for emergency expenses, and the interest rates are significantly less than a payday loan. Most short-term personal loans have a fixed interest rate and repayment period. 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. The result is that they have higher interest rates, which commonly range from 5 percent to 36 percent. As you can see, even those rates are significantly below 100 percent, much less the 400 percent of some payday loans. You can also borrow much more with a personal loan, making it a much better option for most emergency expenses.

If you want more details about personal loans, contact the financial experts at Get Money. There are many installment loans online for bad credit. You should be able to find something that suits your needs.

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