What do you have in mind when you hear about payday loans or personal loans? It could be a quick source of emergency funds or a debt headache. In most cases, payday loans and personal loans fill the void when you have an emergency and don’t have enough cash.
Indeed, millions of people live paycheck to paycheck, and they cannot afford to deal with a $400 emergency. And that is why you find that payday loans are increasing day by day.
Before we head to the benefits you get from payday and personal loans, let’s first know about these loans.
What are payday and personal loans?
When I say payday loans, I mean the kind of loans you take out in the middle of the month and pay off on the next paycheck. Interest rates are typically high, starting at 390% APR, which is higher than a typical loan.
Payday lenders hide in the high rates saying they are covering the risk of default since they are dealing with high risk customers. However, the high interest rate does not prevent people from taking out payday loans.
Personal Loans offers a wide variety of loans that you take out to meet your individual needs. The lender does not limit you on how you can spend the personal loan you take out. And that’s different from mortgages or car loans.
What are the advantages of personal and personal loans?
1. It’s easy to acquire
In most cases, anyone can get a personal loan, as long as they can prove they can afford to repay the loan. Additionally, the application process is generally transparent and straightforward. Yet lenders don’t need a lot of documentation, unlike other loans that require collateral.
You only need the following:
- A valid ID
- Resident’s actual address
- Source of stable income
- Being older than 18
This means that getting a personal loan is not that complicated.
2. They are not guaranteed
Payday loans and other personal loans do not require a borrower to have collateral when applying for a loan. And that means that if you fail to repay the loan, the lender won’t come and collect your property to get their money back.
Lenders depend on your ability to repay, which is why they don’t require you to provide collateral.
3. There is no credit check
When applying for fast payday loans online, lenders do not run credit checks. This is because they believe the past does not dictate how the future should be. Also, your paycheck determines how much you get as a payday loan.
You can spend a personal loan for whatever reason you want. It could be vacations, car repairs, home renovations, debt consolidation, education, or even paying grocery bills.
The lender is quick to find out how you are spending the money. All they need is for you to pay according to your agreement.
5. Better interest rates
If you have a good credit rating for personal loans, you can get a loan with better interest rates than payday loans. Getting reasonable interest rates ensures that you don’t fall into the debt trap of high interest rates.
6. You can apply for a payday loan or a personal loan online
With ever-changing technology, payday lenders and personal loans have flooded the internet with great loan offers. Customers are on the internet in today’s world, so you need to bring services to the internet. And that’s what personal lenders have done.
Personal and payday loans can be a great way to get emergency loans. However, if you do not manage them well, you may end up in a debt cycle. Therefore, you can consider creating other sources of income that can help keep you out of debt in the long run.
Remember that if you need a loan, you should only take out the exact amount you want. Don’t take more than you can comfortably repay.