Quick Tips and Best Uses for Personal and Payday Loans
With so many loan products and credit options on the market, finding the right loan and understanding their terms can be tricky. When you find yourself in need of some extra cash, here is a quick look at payday loans and personal loans to help you make an informed decision.
Also referred to as short-term cash loans, this type of loan is one that you would turn to in a financial crunch. Typically available in small sums, you will be expected to supply the lender with a check for the full amount with added interest before accepting the loan. If you have exhausted all other options and need funds to make it to the next paycheck, a payday loan may be helpful. This loan can be beneficial in the following situations:
Unforeseen car repairs
Sudden illness or injury
Unfortunately, some lenders see your financial need as an opportunity to reel you into a brutal debt cycle that will pad their pockets.
Careful research in finding a reputable lender is crucial with this loan option. Equally important is the ability to repay the loan in a timely manner, and with no collateral involved, interest rates can be remarkably high. In fact, the Center for Responsible Lending reports that payday loans can see rates as high as 521 percent APR.
Personal loans come in all shapes and sizes, but for the most part, they all consist of a fixed repayment plan at steady rates. This type of loan can be either secured or unsecured and can be obtained from mortgage lenders, credit card issuers, merchants, credit unions and more. Featuring larger amounts, longer terms and lower rates than their payday counterparts, personal loans are suitable for considerable purchases that need more time to pay back. When the following needs arise, a personal loan may be able to help:
Substantial medical bills
Since credit worthiness spans a large range, personal loans are equally diverse in their terms and interest rates. While your credit certainly plays a role in this loan product, you can typically find one to fit any credit score. As for securing a personal loan, the Internet is a great place to start, but be vigilant in your search and mindful of scams. The Federal Trade Commission suggests that consumers avoid companies that demand up-front fees, offer unclear terms or request wire transfers.