Both online payday loans and bank loans can provide relief when you need cash for a planned or unplanned expense. However, these two types of financing differ in some ways. Below are some differences of the loans.
To apply for a bank loan, you have to visit the bank’s offices and fill out the application forms. After submitting the application, it may take a few weeks for your loan to be approved. On the other hand, online payday loans are applied for over the Internet. Approval time for the loans is short, usually within a few hours. With instant payday loans, it takes less than an hour for them to be approved and for cash to be wired to your account.
Amount of Loan
Bank loans are meant for big projects and thus the amount given is large. You can be approved for a loan of $2000 or more. With payday loans, the amount you can be approved for is limited, usually not more than $1500. You cannot be approved for a payday loan that is more than your monthly income.
Bank loans are usually meant for long-term projects. You may have from 2 to 5 years to pay back a bank loan. In contrast, payday loans are short-term loans that are meant for emergencies. Their payback period is usually short, ranging from 7 days to 30 days.
To get approved for a bank loan, you must have a good credit score. If your score is below 620, you may be required to provide collateral for the loan. For payday loans you do not need a good credit score or collateral to be approved for financing – getting approved is much easier.
The interest rate of bank loans is set based on your creditworthiness. With online payday loans, the interest is fixed by the lender and you will pay the same interest regardless of having a good vs. a bad credit score.