Payday Loans vs. Bank Loans: The Best Choice for Immediate Cash

Payday loans are cash advances on income that is anticipated within a short period of time. This type of loan tends to have a brief lifespan, but can end up costing borrowers more than traditional bank loans in regard to interest and fees. When it comes to speed of approval and actual release of cash, however, it is hard to top payday loans.

The Loan Application Process

Although the specific loan application process for payday loans can vary based on the provider, this type of loan typically requires minimal information. Firms that offer short term personal loan vehicles will usually ask for:

• Proof of income
• Bank account information for depositing money and making the repayment withdrawal(s)
• Identifying information, like a driver’s license and/or Social Security number

On the contrary, banks tend to require much more detailed information. They will, for example, look into credit history, debt-to-income ratio and other factors before approving a loan.

The Approval Process

When it comes to payday loans versus bank loans, the approval process is another area where there are major distinctions. In most cases, payday loans are approved rather rapidly once incoming funding on the part of the borrower is verified. Bank loans can take days or even weeks to go through the approval process, depending on the lender and the applicant’s credit history.

Speed of Funding

In regard to speed of funding, payday loans tend to offer the best option. This type of loan will typically release cash upon approval almost immediately. The actual time between applying and receiving money can vary, based on the lender in question, but some companies are able to release cash within hours.

On the contrary, bank loans are generally held up by the approval process. Actual funding, however, can move rather quickly once approval is granted for a loan application.

Amount of Financing Available

Bank loans tend to involve larger dollar amounts than standard payday loans. When only a few hundred dollars is required, for example, banks will not generally have a lending instrument available to help. Payday loans, however, are designed for this type of borrowing.

The Life of the Loan

Payday loans tend to deal in very short terms. In most cases, these loans are meant for full repayment within a few weeks. Extensions, however, can often be purchased for additional fees.

Bank loans will typically offer a longer repayment period. A loan, for example, can have a repayment period of multiple years.

The Cost of Financing

While payday loans tend to offer a much faster option for obtaining cash when it is needed, the costs associated with this type of financing can run high. The actual fees and interest attached to this type of short term personal loan will vary, but rates into the 300 percent range and even higher are not unheard of.

Bank loans are generally much more straightforward in regard to interest and fees. Borrowers can expect to pay going rates with modifiers for the condition of their personal credit history.

Payday loans do require careful consideration because of the cost of financing involved. This option, however, does provide a much quicker way to obtain cash than going the traditional bank route.

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