Personal Loans vs Payday Loans – A Comparison Spectrum

When it comes to lending, many people believe that personal loans and payday loans have a great difference. This is partly correct. However, the extent of the similarities and difference are not yet fully explored. You may need to research thoroughly in order to get the useful information about payday loans and personal loans.


To properly understand these types of loans, it’s important to analyze them based on various factors.


Lending Reputation


When it comes to reputation, the regular personal loan is more acceptable than payday loans (or other unsecured loans). Experts recommend personal loans because of a combination of different factors. Around the world, numerous blogs and websites are discussing the nature of personal loans.


Payday loans, on the other hand, reside on the darker (or grayer) part of the spectrum. Some experts think that payday loans will cause people to sink quickly in the trappings of debt. Others believe that proper loan management can get you out of the cycle of payday loans.


Interest Rate Scaling


Personal loans have manageable interest rates per month, and these rarely change. While not all personal loan lenders agree to a common ground, their rates are justifiable and can match the lifestyle of the average employee or freelancer.


Payday loans are notorious for outrageous interest rates. If you’re not too careful around payday loans, you’ll end up paying more than 200% of the principal. Most payday lenders also collect weekly interest and they may resort to unscrupulous methods to get what is owed.


Credit Investigation


Since personal loans are offered by banks and sanctioned organizations, there’s a credit check system that must be followed. In this process, the lender will review your credit status, income report, and personal profile. From there, your application can be approved or declined. Because of this credit check process, application may take longer. Some borrowers waited for a day before their funds are released. It’s estimated that up to 60% of global borrowers are denied every day.


For payday loans, the credit investigation process is almost nonexistent. Once you visited a payday loan sg lending site, you just need to input the necessary information and you’re good to go. The application can be finished within 30 minutes or an hour, depending on the lender.


Payment Collections


Personal loan lenders, typically, do not issue collaterals. To collect the money owed, they rely on collection agencies and other representatives. If payment is not collected, personal loan lenders may pursue the necessary court action.


The same can be said for payday lenders. They have persistent collection agents that can bug you day and night if you missed a payment. So, make sure you don’t miss a payment period.




If you’re going to observe it well, there’s only a fragile line that separates personal loans and payday loans. The loan terms can be used interchangeably, yet they still serve the same purpose. Just remember this: as long as you can repay the loan, the difference will rarely matter at all. The nature of the lender will matter more because it can change lending policies within a snap.