Personal loans vs. payday loans: Which is right for you? | finder.com

Personal loans vs. payday loans: Which is right for you?

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Need to borrow around $1,000? Find out if you should get a personal loan or short-term loan.

There’s a wide range of loan options available to those who want to borrow money. Each type of personal finance is suited to a different type of borrower and can be used for different purposes — this includes personal loans and short-term cash loans (also known as payday loans).

In this guide we break down the key differences between the two, outline their costs and help you determine which will be the best loan when you want to borrow a small amount of money.

Quick snapshot of three main differences

Short-term loansPersonal loans
AmountCan be as low as $200 or as large as $5,000Usually between $1,000 and $50,000
Collateral requiredNone, usually unsecuredCan be secured or unsecured
CostsFixed finance charges based on your loan amount and state of residence, usually comes out to a few hundred dollarsInterest rates range from 4% for excellent credit to as high as 35.99% for poor credit

Compare personal loans vs. payday loans

Rates last updated December 18th, 2018
Unfortunately, none of the short term loan providers currently offer loans in your state. Learn more about short term loans in your state to find an alternative.
Name Product Product Description Term of Loan Turnaround Time Max. Loan Amount
CashUSA Installment Loans
A connection service for quick cash loans up to $10,000.
90 days to 72 months
As early as 1 business day
$10,000
Jora Installment Loans
Installment loans with repayment terms up to 30 months, depending on your state.
4–30 months, varies by state
1–2 days
$2,600
OppLoans Installment Loans
Installment loans with competitive rates from a top-rated direct lender.
9 to 36 months
1 business day
$5,000
CashNetUSA Loan
Apply for a short-term loan with an easy online application and dedicated customer service.
Varies by state
1 business day
Varies by state
LendYou Short-term Loans
Apply online with this loan-connection service offering unrestricted short-term loans with fast turnaround.
Varies
1 business day
$15,000
Check into Cash Payday Loan
With 1,000 branches in 30 states, get $50 to $1,000 in days from this direct lender.
Varies by state
1–2 business days
$1,000
ACE Cash Express Short-term Loans
Quick payday, installment and title loans with no prepayment penalty and a 72-hour satisfaction guarantee. Funds can be loaded on an ACE Elite™ Visa® Prepaid Debit Card.
Varies by state
Generally receive the money the next business day
Varies by state

Compare up to 4 providers

Rates last updated December 18th, 2018

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Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
Name Product Product Description Min. Credit Score Max. Loan Amount APR
Even Financial Personal Loans
Get connected to competitive loan offers instantly from top online consumer lenders.
550
$100,000
3.84% to 35.99% (fixed)
Credible Personal Loans
Get personalized rates in minutes and then choose a loan offer from several top online lenders.
Good to excellent credit
$100,000
4.99% to 36% (fixed)
LendingClub Personal Loan
A peer-to-peer lender offering fair rates based on your credit score.
640
$40,000
6.95% to 35.89% (fixed)
Monevo Personal Loans
Quickly compare multiple online lenders with competitive rates depending on your credit.
550
$100,000
3.34% to 35.99% (fixed)
NetCredit Personal Loan
Check eligibility in minutes and get a personalized quote without affecting your credit score.
550
$10,000
34% to 155% (Varies by state) (fixed)
SoFi Personal Loan Fixed Rate (with Autopay)
No fees. Multiple member perks such as community events and career coaching.
680
$100,000
7.24% to 15.24% (fixed)
Marcus by Goldman Sachs Personal Loans
Consolidate your debt or pay off large expenses with competitive rates and no fees.
Good to excellent credit
$40,000
6.99% to 24.99% (fixed)
OneMain Financial Personal and Auto Loans
An established online and in-store lender with quick turnaround times. Poor credit is OK.
Varies
$30,000
16.05%–35.99%* (fixed)
Avant
Conveniently check your loan options without affecting your credit score.
580
$35,000
9.95% to 35.99% (fixed)

Compare up to 4 providers

What’s the difference between personal and short-term loans?

There are several key differences between personal loans and short-term cash loans (also known as payday loans) including:

  • Loan amount. You can usually borrow anywhere from $50 up to $1,000 for a payday loan — some offer loans as high as $5,000. Personal loans come with much higher maximum loan amounts that can be as high as $100,000.
  • Eligibility. Personal loans offered by banks and credit unions have strict eligibility criteria that often includes good credit and a regular income. Cash lenders that offer short-term loans are much more flexible and will consider those with bad credit, those who receive government benefits as income or people who are unemployed.
  • Lenders. Personal loans are offered by banks, credit unions and online direct lenders. Short-term loans tend to be offered by online lenders specializing in only that type of product.
  • Cost. Personal loans will be cheaper overall, but you’ll have to have credit in order to be approved. While payday loans have a quick approval process and can grant funds faster, you’ll undoubtedly pay for this convenience.
  • Loan term. Cash loans come with much shorter terms, usually between a few days and a year (depending on the loan amount). Personal loans, on the other hand, come with a minimum loan term of one year and a maximum of between five, seven and some even extend to 10 years.

What’s the cost difference between a personal loan and a short-term loan?

Personal loans don’t come with APRs higher than 36%. On the other hand, short-term loans can come with APRs in the thousands. It’s important to note that the annual percentage rate calculates yearly cost. If you decide to get a short-term loan and repay it in one month, the actual dollar amount you pay on top of what you borrow may be a better representation of costs.

The cost of a personal loan can be based on your credit history, if you’re offering an asset as collateral, the term length of the loan and more. Payday loan costs vary by state and lender but are often a high-cost product that lends money almost immediately with little to no credit check.

Short-term loan costs

  • For every $100 borrowed, the cost of a payday loan repaid in less than a month is just around $25.
  • For every $100 borrowed, the cost of an installment loan repaid over a few months is just around $15.
  • The average term of a payday loan is two weeks and it can have APRs ranging from 380% to over 1,000%.

Personal loan costs

  • Unsecured personal loan interest rates will generally be a bit higher than their secured loan counterparts because there is no asset as security attached to the loan. For a $2,000 loan with an 8% APR, you could expect to pay a little over $250 interest.
  • Peer-to-peer loans tend to come with comparable rates that are based on your credit score. Rates can be as low as 5% or as high as 35.99%.

How can I decide which type of loan is right for me?

While there are similarities between the two products, there are big differences as well. Asking yourself the following questions will help you decide which type of loan is right for you:

  • How much money do I need to borrow?
    If you need to borrow between $50 and $1,000, a short-term loan is better suited for you, as personal loans tend to have minimums between $1,000 and $2,000.
  • How fast do I need the money?
    Short-term loans usually have faster turnaround times than personal loans because less is involved in the approval process. If you need money by tomorrow, a short-term loan could be a better fit.
  • How is my credit history?
    If you have good to excellent credit and regular income, you could stand to save money by getting a low-interest personal loan rather than a high-cost short-term loan.
  • How much will it cost me?
    Ultimately, it comes down to your monthly payments and total repayment amount. Be sure to compare multiple options and explore those lender’s online calculators to see what’s most affordable for you.

How does a personal loan and short-term loan affect my credit score?

Payday lenders for short-term loans usually don’t send your loan information to the three main credit reporting agencies. However, they may send your loan terms and repayment information to smaller credit agencies that can be accessed by mainstream lenders when you’re applying for a loan. Personal loan lenders do report your information to the three main credit reporting agencies. For both personal and short-term loans, the most important thing to do is make your repayments on time. If you don’t, your credit score will be negatively affected.

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US Payday Loans Offers

Important Information*
CashNetUSA Loan

Apply for a short-term loan with an easy online application and dedicated customer service.

Check into Cash Payday Loan

With 1,000 branches in 30 states, get $50 to $1,000 in days from this direct lender.

OppLoans Installment Loans

Installment loans with competitive rates from a top-rated direct lender.

LendYou Short-term Loans

Apply online with this loan-connection service offering unrestricted short-term loans with fast turnaround.

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