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Personal Loan
Payday Loan vs Personal Loan: Which is Right for You?
Key Takeaways
Payday loans are short term, small amount loans with very fast disbursal but higher interest and fees compared to personal loans.
- Personal loans offer larger loan amounts, longer tenures and generally lower interest rates, making them better for planned or bigger expenses.
- Payday loans often need minimal documentation and lighter credit checks but carry rollover and debt risk, while personal loans use credit checks and structured EMIs.
- IDFC FIRST Bank provides alternatives like FIRSTmoney, plus online eligibility checks and EMI tools to compare costs and choose the right borrowing option.
Borrowers today can choose from many types of loans to fund their needs. Payday loans and personal loans are, however, more popular than others.
A tricky financial situation can affect your savings, but only if you let it. There are many ways to address a challenging problem, although using your hard-earned savings and redeeming your investments is not the wisest choice. Instead, you can counter the situation by taking out a loan from lenders such as IDFC FIRST Bank.
Whether you want to repay your credit card debt or gift a precious product, you can get a loan for anything from IDFC FIRST Bank. Personal loans and payday loans are popular among borrowers as they can be used to meet any requirement.
What is a payday loan?
A payday loan is a high-interest, unsecured loan that proves especially useful during emergencies. The loan amount is disbursed immediately after it is approved, and borrowers repay the amount when they receive their next salary or income from other sources. Working professionals stand to gain the most from payday loans, as it is designed with them in mind.
Salaried professionals can use payday loans even if they have exhausted their salary at the beginning of a month. This makes payday loans an appealing option, despite their high interest. Common uses of these loans include paying rent, EMIs, and living expenses.
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What is a personal loan?
A personal loan is a short- or long-term loan used to fund weddings, renovation, or vacations. Borrowers have complete freedom and flexibility to spend the loan amount. The loan is approved based on the borrowers’ credit score and capacity to repay the loan. It is usually repaid in set monthly instalments over time. The interest rates on personal loans vary from one bank to another.
IDFC FIRST Bank offers online personal loans at competitive interest rates, starting from 10.49%. It is among the lowest in the industry.
Payday loan vs personal loan: what is the difference?
There are several differences between a payday loan and a personal loan. A few of them include:
Loan amount
The loan amount of payday loans usually varies from ₹10000 to ₹2 lakhs. Meanwhile, personal loan amounts can begin from ₹50,000 and extend up to ₹50 lakhs.
Lending institution
Almost every lender, including IDFC FIRST Bank, offers instant personal loans. Payday loans, however, can only be obtained online through a few select lenders.
Eligibility
The eligibility criteria for personal loans are comprehensive. Lenders check your credit score, income, credit history and apply thorugh an instant loans app. Payday loans are more flexible. Borrowers with average to poor credit scores can also get a payday loan. Payday loans are made available to anyone with proof of identification, banking information, and a salary slip.
Approval time
Personal loans might be more affordable, but the authorisation process takes time. Payday loans are quicker, as they have a speedy assessment and approval process. The tradeoff, however, comes in the form of the extra fees you must pay on payday loans.
Interest rate
The personal loan interest rate might vary from 10% to 35%, depending on the borrower's profile and the bank's terms. In contrast, the interest rate on a payday loan can range between 30% to 40%.
Tenure
Payday loans have a relatively shorter term. They might last from a handful of days to a year, based on the quantity borrowed. Personal loans last longer, with tenures ranging from three months to ten years.
Personal loans and payday loans are equally beneficial. They may have their drawbacks, but both products are useful for borrowers with specific needs. You should analyse your requirement and then carry out extensive research to figure out the best option for you. Download IDFC First Bank's banking app to get started today!
Advantages of Payday Loans:
- Quick access to cash
- Minimal documentation
- Easy qualification
Advantages of Personal Loans:
- Lower interest rates
- Longer repayment periods
- Positive impact on credit score
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirst.bank.in for latest updates.
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