Private loans and payday loans may have the same purpose– to help individuals struggling financially. However, they have their differences in terms of payment terms. For one, payday loans usually operate in a shorter time frame while private loans usually extend from two to five years. If you want to learn more about their differences, then this guide might help you.
When to Get Payday Loans
A payday loan is a short-term borrowing that allows the lender to extend a high-interest credit depending on the borrower’s credit profile and income. The principal is usually a portion of the borrower’s next paycheck. This type of loan is also called the check advance or the cash advance loan.
Payday loans are popular in Sweden because it suits the economy. In fact, it is already normalized. The Swedish Financial Supervisory Authority makes sure that lenders and borrowers have the authorization to transact. But when should you get a payday loan?
1. When you need money quickly
Most lenders, including smslån, approve applications for payday loans soon after you submit the requirements and provide the necessary information. The application is quick and simple. There are no lengthy forms to fill out.
2. When you want convenience
You can apply for a payday loan online. Thus, you don’t need to go to a loan office, apply, and come back another day to get the cash.
3. When you want to protect your credit rating
Perhaps, the biggest advantage of the payday loan is its inability to affect your credit rating. Though it may seem like the short repayment period is a shortcoming at first, it can actually protect your credit score. Because the lender will automatically get a percentage from your account during your payday, you will be forced to pay, thus avoiding penalties and fines.
When to Get Private Loans
Private loans are unsecured loans that borrowers usually take from a bank or a financial company to meet their personal needs. The amount borrowed will depend on the person’s income level, employment history, credit score, and repayment capacity. When should you get a private loan?
1. When you want to get a lower interest rate
Because there’s a great perceived risk when sanctioning a private loan, it usually has higher interest rate compared to a car loan. However, if compared with the payday loan, it’s interest rate is relatively lower. Thus, they are more affordable. If you have a good credit score, this might be the type of loan for you.
2. When you have no collateral or security to give
Private loans don’t require a collateral. Thus, your assets are safe. However, you do need a good credit score to convince the lender that they can trust you to pay back their money.
3. When you want to boost your credit score
It’s never a good idea to get a private loan simply because you want to boost your credit score. It is not worth the cost you have to pay. However, if you have a planned purchase that you need to put on your credit card, then it’s better to get a private loan instead. After all, with private loans, you can borrow cash for about any purposes.
Conclusion
Upon learning the different advantages of payday loans and private loans, you might have decided suits you better. Just make sure that whatever type of loan you get, you will be able to repay it.