Personal Loans vs Payday Loans
Perhaps you are wondering whether personal loans or payday loans are a good idea. There are various pros and cons to both types of loans, but, when applying, you cannot get both. Therefore, learning about personal loans and payday loans will be very helpful.
What Are Personal Loans?
Personal loans can be either unsecured or secured loans. They are loans which can be either small or large as they usually range from £1,000 to £35,000. Depending on which lender you choose to borrow a loan from, you could be borrowing it and repaying it for up to 6 years. This means that you are required to pay in small monthly instalments until you have paid off the loan. Personal loans can be used for whatever you like, hence the name. But, that doesn’t mean they should be.
Pros
Whether you are wanting a loan for a holiday, a car, debt consolidation or anything really, a personal loan has you covered. With personal loans being for anything you want, they are perfect for those who can’t afford the things they want in one go.
Another pro of personal loans is that you repay the loan in smaller monthly instalments. This way you have better money-management and more control over your budget. This leaves you with less stress and worries about missing a large repayment.
Lastly, you can borrow up to £35,000 with brokers like Simple Personal Loans. Unlike a payday or short term loan, personal loans allow you to borrow a larger chunk making it easier for you to afford payments or even consolidate debts.
Cons
Firstly, your repayments are a fixed amount. Although this could be seen as a good aspect, it could also be negative too. This is if you are struggling to repay the fixed amount for one of the months, you could find yourself with further bills.
As well as this, personal loans can be harder to get your hands on than other loans if you have bad credit. This tends to be because they are larger loans. But, some unsecured and secured lenders will still lend to you.
What Are Payday Loans?
Payday loans are smaller sized loans which you borrow and then repay from your following wage. They are a loan which can tide you over until payday. Typically, depending on the lender or broker, you can borrow from £50 to £1500 and then repay it from next payday. Payday loans should only be used in emergencies, for example, if you are running short of essential money mid-month or your car has broken down and you need to get it repaired. You shouldn’t spend a payday loan on things which you do not need.
Pros
Payday Loans are quick and convenient. Sometimes we find ourselves in unfortunate situations and don’t have enough money in the moment to afford what we need to. Therefore, payday loans are great for solving issues like this. Most lenders offer same day loans meaning you’ll get your loan on the same day.
Second of all, it is easier to get a payday loan than any other type if you have bad credit. Along with this, they have fewer requirements meaning they’re easier to get for everyone.
Lastly, they’re only small loans meaning they are easier to repay. With only being one payment they are not something you need to continuously worry about.
Cons
You could get trapped in a debt cycle. This is because payday loans are so easy to borrow. You are able to apply for a loan and if you have a good credit score, the chances of you being accepted are high, meaning you might frequently begin using payday loans.
Secondly, they have high-interest rates. These rates are much higher than you would normally get on other types of loans. The high-interest rate makes the overall repayment bigger than you may have expected which could lead to a risk of repayment.
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