A lot of people take loans for one or another reason. Aside from purchasing homes and vehicles, arrangements for urgent hospitalization of family members, unexpected bills, vacations, etc. are some of the common reasons why people seek loans. To cater to the varying needs of borrowers, lenders and financial institutions have come up with various types of loans. As such, it is handy to get familiar with the common types of loans such as a payday loan or long-term personal loan.
What is a payday loan?
A payday loan is a loan that’s offered in smaller denominations for a short period of time. If you are over 18 years of age and can provide proof of your income source, you are likely eligible to get a payday loan. As a borrower, you have to submit a filled-out application online or in person at the lender’s store. If the lender is satisfied with your application, money will be wired to your bank account within as little as one business day. You have to repay the loan amount along with interest (which is a bit high) on your next payday.
Such a loan is helpful for meeting urgent expenses of smaller denominations. In case you are required to pay off urgent household expenses or unexpected bills, a payday loan can be handy. The whole process of lending and borrowing is either completed online or at the lender’s store.
Also, lenders rarely check your credit score when providing money. Even people with bad credit are able to utilize these short-term loans as long as they can provide proof of income. This is why many people use these loans for meeting expenses of smaller amounts between paydays.
What is a long-term personal loan?
Long term personal loans are larger loans where borrowers have to repay the loan over an extended period of time. An adult individual with a good credit score and a secure source of income can usually get this loan. However, he or she generally must submit a lot of information to qualify for a long-term loan. The process of lending is smooth and fast; you can get a loan within a couple of weeks (sometimes even days) if you meet the lender’s criteria.
These loans are helpful for making larger purchases. A costly home renovation, additions to your home, etc. are some of the reasons why you may want to take out a long-term loan. The biggest plus of these loans is they come with a relatively low rate of interest. Also, the repayment time is longer, and you can get a larger amount of money.
Both payday and personal loans have their uses and benefits, and they should be used accordingly. If you need a small amount of money urgently for a short period of time, a payday loan is advisable. On the flip side, a long-term personal loan might be a better bet for meeting larger financial obligations. If used wisely and according to the situation, each of these loans can be helpful in resolving your financial affairs.