There’s no doubt that a financial emergency or a big-ticket purchase can take a toll on your finances. In such situations, liquidating your hard-earned savings is not the best move. Instead, it is better to get a loan from a trusted lender to meet your immediate fund requirement. But when it comes to loans, it is critical to make the right choice.
As far as loans for personal use are concerned, there are two loan options most commonly available in the market:
- Personal loans
- Payday loans
And while they may sound similar, they vary significantly. So, let’s have a closer look at personal loan vs payday loan differencesbelow.
What is a payday loan?
Payday loans are short-term unsecured loans that can help you out during a cash crunch. Unlike personal finance options, they are convenient for paying minor expenses like house rent, car repair or buying a gadget before the next payday. Although these loans are instant, the interest rates associated with payday loans are generally high.
Moreover, these loans cater to salaried employees who can repay the loan as soon as their next paycheck arrives. So, you get only a few weeks to repay a payday loan.
What is personal finance?
Personal finance also falls under unsecured loans that don’t require the borrower to pledge a guarantee or security. There are also no end-use restrictions on the loans. Also, since most lenders usually follow simple personal loan eligibility terms, you can qualify for a loan in no time.
Personal loan is among the most sought-after loan products nowadays. This is because it is flexible in terms of amount, tenure, and repayment. What’s more, some reputed financial institutions even offer attractive features and extra benefits on their personal finance schemes.
Which should you pick?
If you are looking for a clear winner among the two options, there is none. Ultimately, it all comes down to your financial goal and situation. If you are in the middle of a temporary cash crunch or are looking for a loan to finance a small purchase, a payday loan is suitable for you. But remember, you will have to pay off the loan in a short span.
On the contrary, if you require a large sum of money, you must consider personal finance. You can pay the monthly EMIs over a flexible tenure and use it for various purposes. But you require a healthy credit score and DTI ratio to get approval for personal finance. In contrast, there is no such requirement for a payday loan.
Therefore, if you are confused about payday loans vs personal loans, base your decision on the amount you need and how quickly you need it!
Additional Read: Tips & Tricks to Track Your Personal Loan Status Online
To sum up
After you have made your choice, you must look for a trusted lender. Tata Capital offers tailor-made personal finance options at competitive personal loan interest rates and many other loan offerings. Thus, you can finance a gamut of purchases and enjoy a seamless borrowing experience. Explore our loan offerings here.