PayDay Loan: Nowadays as the needs of people are changing, the loan options are also changing. Earlier, where only the name of personal loan was heard, now a new name is coming up – Pay-Day Loan. Now it may sound a little different but its purpose is simple – when your salary is delayed and the need of money arises suddenly, then this loan can be very useful for you.
Personal Loan vs Pay-Day Loan
So, let’s first understand what is the difference between personal loan and pay-day loan. Personal loan is the one that you take from the bank for marriage, education, treatment or any big expenditure. In this, the amount is also big and the time is also long – like the tenure can be from 1 year to 5 years. On the other hand, pay-day loan is a very small and short term loan. For example, if you run out of money in the middle of the month and your salary is still a week away, you can take a payday loan. The amount is small and the time is also less – just until your next salary arrives.
The game of interest and the impact on the pocket
Now comes the real thing – the interest rate. The interest rates of personal loans can generally be from 10% to 26%, that too for the whole year. But in payday loans, the game of interest and fees is something else. If you do not make the payment on time, then this loan can be very heavy. Sometimes you may have to pay up to 100% charge, that is, you have to pay interest as much as the loan taken.
Which loan will be right to take when?
If you want to take a loan for a big work like marriage or home renovation, then personal loan is the best. But if there is a shortage of money at the end of the month, or you have to meet some expenses in a medical emergency, then payday loan can prove to be helpful. Yes, keep in mind that this loan is available quickly but is expensive.
Credit score requirement and rules and regulations
In a personal loan, the bank checks your credit score, job stability and other things thoroughly. On the other hand, there is not so much process in payday loans. Sometimes you get a loan just by looking at your income proof. These loans are mostly available from digital apps or platforms. Although RBI is a little less strict on this right now, but gradually the rules are being tightened.
What to do finally?
Look, taking any loan means taking a responsibility. The lure of a payday loan may be to get money quickly but its cost can be very high. On the other hand, personal loan is a little slow but more reliable and beneficial for the long term. That is why before taking any step, definitely consult a financial expert or bank once.