What Is the Difference Between a Payday Loan and a Normal Loan?
If you find yourself in a tricky financial situation, there are many different ways you can borrow money – you can ask for help from family and friends if they are able to provide it, you can use a credit card, use lending companies or else take out a loan from a bank. Different types of loans may seem very similar to one another, but in actuality, it’s important to know the differences between them before making your decision – it’s not one to take lightly, is it?
Often, the most popular choices when you’re in dire need of a bit of extra cash, for whatever reason, is a loan. Deciding between taking out a loan from the bank and taking out a payday loan is often the question on people’s lips – what is the difference between a payday loan and a traditional loan that you would take out from the bank? Payday loans are incredibly different from bank loans and both can be used in different ways and are great alternatives to financial distress.
Normal Loans Vs. Payday Loans – What’s the Difference?
Normal, traditional loans that you would take out from a bank or building society are typically set up with the intention of paying back over a regularly occurring timetable, over a set period of time. This is usually over a longer period of time for a larger amount of money. You can normally arrange to set up a payment schedule either on a weekly or monthly basis – whatever your preference. Examples of normal loans include debt consolidation plans, car loans, mortgages and personal loans – all of which would not be settled within a few weeks. Loans like this are long-term financial investments and paid off over a set period of time rather than by the next payday, or within a few weeks.
This is where a conventional payday loan differs from a normal loan – usually, payday loans can be quickly settled – usually within a few weeks or else when you are next paid your pay cheque. Typically, you would choose to submit a date to the payday loan lender when you submit the application for the loan – this means it can be redeemed on payday and paid off immediately. Payday loans are best suited for those who need a short term solution but know that their salary will soon be paid to them and they will be able to repay the loan.
Which Option Is Better for Me?
Both payday loans and traditional loans are helpful things but they should be used in different ways – they differ in the sense that traditional loans are intended to cover larger costs and should be repaid over a longer period of time, made up of regular, scheduled repayments. If you’re looking to borrow money to buy a car, then a traditional car loan may well be your best bet. On the other hand, if you have a technology malfunction and quickly need to replace something in your home in the days before you’re paid your salary, a payday loan may well be the best option for you. You can ensure that you receive the money quickly and promptly and you can repay it by the time your monthly pay cheque hits the bank.
If you are in urgent need of the money, payday loans are likely better for you as they can be awarded instantly. On the other hand, traditional loans have turnaround times and protocol to follow that can be quite time consuming, so it may take longer than you need for the loan to be accepted by the lender and paid directly to you.
Differences in Loan Amounts?
Most traditional loan providers are able to offer around £50,000 to borrowers, depending on a multitude of factors including your earnings, your credit score and your repayment history. On the other hand, you’ll find that amounts lent by payday companies typically range from between £50 and £1000 and no more – an affordable amount that can be quickly repaid when you yourself are paid. Some payday companies are able to lend more than this, but it would depend on your personal circumstances and your capacity to pay back the loan.
You should consider exactly how much you need to borrow – if you’re looking to borrow between £50 and £1000, a payday loan could be a healthier and better option for you, because conventional loans generally have limits as to the minimum loan amount you can borrow.
How Much Will It Cost Me?
Generally, it’s more affordable in terms of interest rates to take out a traditional, normal loan but as a result, you’ll need to ensure you have an excellent credit rating. On the other hand, whilst payday programmes can tend to be a little more costly, there are usually better options available to those who have lower credit ratings who may otherwise struggle to get a loan.
You should ensure that you consider exactly how much you can afford to borrow and how quickly you can afford to pay it back – take into consideration your monthly incomings and outgoings and go from there. You should ensure you shop around and find the perfect loan suited to you and your circumstances – without a doubt!
If you’re looking for a payday loan from a reputable provider to help you through that rough financial patch, then look no further than Cobra Payday loans. You can borrow up to £5000 for whatever reason you may have and set up an affordable repayment package to ensure that you are able to pay the money back under your own terms, with your ability to repay completely at the forefront of the loan criteria. With minimum loan terms of a month and up to 36 months of borrowing time, Cobra Payday loans are able to put together a repayment plan for you, based on the amount you wish to borrow and how much you can afford to pay back.« Budgeting Tips for Teenagers