Differences Between Payday Loan and Personal Loan

Posted on 2014-01-04

If you are in search of an unsecured loan, you will find you have lots of options. Two of the most popular types are payday loans and personal loans. Though both options can provide you with fast money and are available from Sumo Credit Pte Ltd, that’s where the similarities end. Consider the key differences between the two options.

Repayment Terms

When you take out a payday loan, you are expected to pay back the money by your next payday. This means you will only have a few weeks at most to repay what you owe, though you may be able to arrange for a longer payment term for additional fees. By contrast, the typical personal loan comes with a repayment term of anywhere from a few months to more than five years.

So if you only need a short-term unsecured loan until you get your next paycheck, a cash loan might be best. But if you would rather repay a small amount of money every month for several months or longer, a personal loan would be better.

Amount of Money

You will find that the typical payday loan offers a smaller amount of money than a personal loan might. In fact, you can usually only borrow up to the amount you will receive on your next paycheck. On the other hand, personal loans tend to allow you to borrow more, since you have years to pay off what you borrow. This means that if you only need the amount you expect to be paid on payday, a cash loan may be right for you, while a personal loan is better when you need a larger amount.

Application Process

Speaking of your credit score, you should know that this is a major factor when it comes to the personal loan application process. To obtain this type of unsecured loan, you need to have decent credit and be able to prove your income by showing pay stubs. When you apply for a payday loan, however, you only need to show identification and proof that you can repay the amount you borrow by payday.

Both types of loans have their own benefits. You might find that a payday loan works best for you at one point, and a personal loan works better at a different point in your life. No matter which type of loan you believe would be right for you, know that you can come to Sumo Credit Pte Ltd for either one.