Although personal loan and payday loans serve the purpose of fulfilling your cash requirements during emergencies, there are a few differences between them. A payday loan or salary advance has to be repaid when you receive the paycheck of next month and usually, the loan amounts are smaller.
The differences between a payday loan and personal loan have been illustrated below:
| Basis | Payday Loan | Personal Loan |
|---|---|---|
| Objective | For immediate cash requirements | Applicant can wait for a week to get the cash |
| Loan requirement | Loan amount proportionate to the monthly salary | Higher loan amount (depending on the monthly salary) |
| Loan period | Shorter period for repaying the loan amount (15 days to 60 days) | Loan tenure ranges from 1 year to 5 years |
| Loan repayment | Whole loan amount is repaid on the agreed date | Loan amount is distributed and paid in smaller installments |
| Interest rate | Interest is charged for a few days or months | Interest is charged annually |
| Loan processing | Shorter period of the loan process as the current financial position of the applicant is assessed | Longer duration for completing the loan process as credit history along with the current financial condition is assessed |
| Loan amount disbursement | Loan amount is disbursed within minutes | Loan disbursement takes longer duration depending on the loan amount |
The type of loan required depends on the requirement and financial condition of the individual. Payday loans are beneficial to those who have an immediate requirement and can repay the amount with their next paycheck. On the other hand, personal loans can be availed for a larger amount and cannot be repaid within a short period of time. Hence, selecting the right option is the key to minimize your financial burden.