How is a Payday Loan Different from Other Loans?Before you make the decision to borrow money, you should have all the information. Know what the options are, what the differences are between these options, and know what type of loan is best for you. A payday loan is a great choice for many people, but before you jump into it you should have all your questions answered. One very important question to get answered is how these loans differ from other types.
A Payday Loan is Based More on Income than Credit
As the name suggests, a payday loan is related to your regular paycheck. While most other loans are based largely on your credit score, this one is based more on your income. A traditional loan lender typically looks at your score from one of the three major credit reporting agencies and approves or denies you a loan based on that number. There is often a minimum score you need to qualify for a loan. With a payday loan, your credit score may not even come into the approval process at all. The more important factor is how much you earn, and that helps determine if you get approved and the amount.
Get a Payday Loan Faster Than Traditional Loans
Another important difference is that compared to a traditional loan, you can get a payday loan much faster. Typically you can apply, get approved, and have the official loan document and terms in an hour or two. The cash is also faster with a payday loan. It will usually be funded as soon as the loan terms are signed, but you may have to wait 24 hours or less to access it depending on your bank.
Payday Loans Are Online and Mobile
Traditional loans are available at banks, credit unions, pawn shops, cash advance stores, and other brick-and-mortar locations. This is standard, but it is also limiting. It means you have to find the time, during business hours, and pay for gas to get there to fill out an actual application and wait while it gets approved. Payday loans are online and also available through mobile apps in many cases. You can apply for a payday loan from home, from your car, from work, while running errands, and basically anywhere you are and at any time. This makes a payday loan much more convenient than other loans.
A Payday Loan is Short, Small, and Affordable
Many other loans are big, have long repayment periods, and because of these factors, are difficult to afford for the typical borrower. A payday loan on the other hand is smaller and has a short term. Most of these loans require that you repay in full on your next payday. This makes it easy to get it repaid and to get right back out of debt again within a week or two. It also means that you don’t pay interest for very long or on a very large loan amount. This is what makes a payday loan affordable.
Now that you know how a payday loan is different, you can make a more informed decision about what to do next, and what type of loan you want to use to take care of your bills.