Have you ever thought about taking out a payday loan, only to find yourself wondering about the other alternatives that could be available to you? Payday loans can be a hugely helpful tool in the short term to get you through until the next payday. However, they’re not ideal solutions in many scenarios, which is important to keep in mind. As such, today, we’re looking at some of the key things you need to know about payday loans and bank loans to help. Hopefully, this will also help you find the ideal type of loan for your requirements.

What are Payday Loans?

First of all, we need to outline what a payday loan actually is. Generally speaking, payday loans are high-interest short-term loans. Effectively, they do what it says on the label: they get you through to the next payday. As such, if you’ve experienced a sudden expense that you can’t currently pay, a payday loan might be on the cards. You are able to use your loan for many things, even to purchase a 125cc moped or moped insurance.

How Payday Loans Differ From Bank Loans

Both payday loans and bank loans offer lending opportunities, but there are numerous key differences between the two. It’s worth considering that neither is necessarily better than the other; however, their intended uses are very different.

• Interest rate: The main difference between bank loans and payday loans is the interest rate. Payday loans are very high-interest, so you’ll want to get them paid off quickly. Bank loans, by contrast, tend to have much more affordable interest rates overall.
• Loan duration: Another highly significant difference is the loan duration – in other words, how long you can borrow for. Payday loans are only designed to be short-term loans, so they may only last for a few weeks or months. However, bank loans are much longer in duration, often lasting months or years before needing full repayment.
• Loan value: If you need a loan for a large sum of money – such as buying a house – you’ll want to look to a bank loan as opposed to a payday loan. Payday loan interest rates can be around 1000% APR, meaning you’ll have to pay back double even if you repay within a month! So, it’s always important to shop around for the best payday loan deals – and, crucially, you should never use a payday loan for large sums of money.
• Ease: Overall, obtaining a payday loan is generally much easier and quicker than a bank loan. As such, if you need money quickly, a payday loan may help. The main exception to this is an overdraft on your bank card, which may be pre-arranged in advance and so can be easy to use.

Final Thoughts

If you’ve been looking to take out a loan, it’s important to consider whether payday loans are the right option. Indeed, there’s no doubt that payday loans are an excellent tool that can help you manage your money in the short term. After all, they’re generally easy to apply for and provide a small sum of cash when you need it. However, if you need a larger sum of money, won’t be able to pay the loan back quickly, or if you are unsure about interest rates, bank loans could be a better option.

If you have any further questions about payday and bank loans, please contact our team today. We’re here to help!