Should You Get a Personal Loan? Essential Do's and Don'ts to Consider

During times of financial difficulties, borrowers find it hard to repay their debts, and this is why they turn to short-term loans or payday loans to cover the difference in payments or to meet unexpected debts that are coming up.

Short-term loans and payday loans are the two financial tools that people usually look for when they have a difficult situation to overcome. Even though they have some things in common, it is important to know their differences so that one can make the right borrowing decision. Read on further to understand what are short-term loans and payday loans and why choose short-term loans over payday loans.

Let’s understand short-term loans and payday loans in detail.

Short-Term Loans: Short term loans usually represent any loan that is repaid within a short period, which can be anything from a couple of weeks to a couple of months. They can be used for unexpected bills or to help you through the period between paychecks.

In contrast to conventional loans, short-term loans are generally approved faster and may not even require extensive credit checks.

Payday Loans: In contrast to other types of loans, payday loans are designed to be repaid at the next paycheck of the borrower. They are generally lower in size and are designed to deal with the payment of small, urgent expenses until the next payday comes.

Payday loans are usually associated with higher interest rates and fees than regular loans, thus making them a more expensive borrowing option. The knowledge of the advantages of each type of loan is crucial for the right choice of loan type that best suits your financial status.

When choosing short-term loans over payday loans, there are some characteristics which set them apart. Let us understand which features differentiate short-term loans from payday loans?

Short-term loans have repayment terms that are flexible and are more easily accessible for individuals who have a not so perfect credit. On the contrary, payday loans are fast cash with fewer requirements, but they can be a cycle of debt if not managed properly. 

• Cost Comparison: The interest rate of short-term loans is lower than payday loans. Hence, short-term loans are a cheaper alternative. When you choose a short-term loan, you can save on the interest and avoid the debt trap.

• Repayment Flexibility: Contrary to payday loans that demand the borrower to return the entire money within a short period, small instant loans allow the borrower the flexibility to pay back the amount.

• Debt Trap Avoidance: In payday loans, you are required to repay the loan in full on the next payday. This can increase the chances of accumulating debt. Short-term loans offer a better repayment schedule.

Short-term loans and payday loans are both types of quick, loans, but they differ in several key features:

• Borrow Money: The loan amount can be higher in short-term loans. Payday loans have a limited amount, which makes them better for small only for small financial needs.

• Credit Score Requirements: Small-term loans are not as strict about credit score requirements, so it is easy to get them even if you do not have a very good credit history.

• Impact on Credit History: Difficult repayment of payday loan can ruin your credit history.  Short-term loans’s repayment flexibility can show you are a responsible borrower.

When you are in a financial crisis, the choice between short term loans online and a payday loan is crucial as it will have a big influence on your financial health. Both options provide a way to get money immediately, but the short-term loan is cheaper, easier to repay, and easier to fall into the debt trap.

As you have already noted the problems we discussed, it is better to carefully analyze your financial needs and select the loan which best serves your long-term financial purpose. Contact the experts from mPokket to get a cash loan online.