In America, it’s the norm to go into debt to afford some of life’s major purchases. While it’s not ideal to owe money, it may be exactly what you need to achieve your goals and reach milestones quicker.
According to the Federal Reserve bank of St. Louis, the average savings rate has gone down from 13% in the 1970’s to less than 8% today. What that means is if you don’t have the money set aside for that medical emergency or car downpayment, you’re not alone!
You may be looking into taking out a loan to ease your financial situation. But which one’s the right loan for you?
In this article, we’ll discuss quick loans vs payday loans and personal loans.
What Is a Personal Loan?
As the name implies, a personal loan is usually money borrowed for personal use. The other type of major loan would be a commercial or business one, which you’d use for the purpose of upgrading your business.
For personal loans, you usually get a few years to repay the amount borrowed; the period is usually 1 to 5 years. Below, we’ll discuss the 2 types of personal loans: secured and unsecured.
Secured Personal Loan
With a secured personal loan, you have to put up collateral in order to borrow money; in most cases, people use their vehicle or home. Should you fail to keep up with your payments, then the lender can take your collateral and sell it to recuperate their losses. This will negatively affect your credit score.
Because there’s collateral being held, lenders typically offer lower interest rates on secured personal loans when compared to unsecured ones. You can also get bigger amounts of cash with secured loans, plus it’s easier to get approved for. An example of this type of loan you may already be familiar with is a mortgage.
Unsecured Personal Loan
When you take out an unsecured personal loan, you won’t have to put down collateral to borrow money. This may be a better choice if you’re not comfortable with putting your valuable property at risk when used as collateral.
However, interests rates may be noticeably higher if you choose unsecured vs secured personal loans. Since there’s a higher risk for lenders, they’ll raise the interest rate for unsecured loans so they’re covered if you default on your loan.
If you have bad credit scores, you may not qualify for the best personal loans, so you may have no choice but to take out a secured personal loan. An example of an unsecured personal loan is a credit card.
What Is a Quick Loan?
A quick loan is exactly what it sounds like: it’s a personal loan you get on short notice. The terms for qualifying are very easy, which means that if you have bad or no credit, it can be a viable way to borrow money quickly. This is especially true since you can usually apply online, so you don’t even need to make a trip to the lender’s office.
However, since the screening process isn’t so rigorous, this means harsher terms. There are significantly higher interest rates; if you can’t make your payments on time, this can lead to a vicious cycle of debt that only gets worse and worse.
What Is a Payday Loan?
A payday loan is a type of quick loan, which means it’s also a personal loan (the unsecured type). Like general quick loans, payday loans are very short-term, have high-interest rates, and only let you borrow relatively small amounts. Plus, it’s easy to qualify for one.
The difference is you can only get this type of loan if you’re employed. Payday loans are usually repaid in one payment at the borrower’s next payday. This means the terms for payday loans is extremely short; they’re typically around 2 to 4 weeks.
Personal Loans vs Quick Loans vs Payday Loans
If you don’t need money in your account on an urgent basis, you should consider a personal installment loan. This should get you the best interest rates, plus you have a longer timeframe to pay the debt off.
Whether you sign up for a secured or unsecured loan depends on how good your credit score is and how comfortable you are with the idea of putting down collateral (or if you even have anything that can be considered valid collateral).
If, on the other hand, you need a small amount of money in a short span of time, a quick loan or a same day payday loan may be better choices. While they have much higher interest rates, you’ll get approval much faster; a traditional personal loan can take up to a week for approval while these other 2 options can take just seconds for approval.
Whichever route you go, be aware that all 3 choices can affect your credit score. If you’re trying to build it up so you can expand your opportunities in the future, it’s absolutely vital you make your payments on time.
Choose the Loan That’s Right for You
Now you know the difference between quick loans vs payday loans and personal loans no credit check. In general, if you want something more long-term, a personal loan is right for you. But if you’re strapped for cash, then a quick loan or payday loan may be better choices.
No matter what kind of loan you choose, make sure to do thorough research so you completely understand the terms and conditions. Not making your payments on time can impact your credit score negatively, so don’t sign up for any loans if you don’t feel confident that you can pay them back. In this case, it may be worth it to save up and make your purchase then.
If you’re looking for the best personal loans online, then take a look at your options.