Three Benefits Of Taking Out A Personal Loan Rather Than A Payday Loan
If you are in need of some cash for a personal purchase, you may be considering taking out a payday loan. This type of loan is quick to obtain, and you don't generally need good credit -- or even proof of your credit history -- to be approved for one. While a payday loan can be convenient, however, it is not usually the best option when you need money. Another type of loan, called a personal loan, is often a better choice. Here's why:
Personal loans have a lower interest rate.
Payday loans may be easy to maintain, but they're very expensive; specifically, they have a high interest rate -- sometimes as high as 400%! That means if you borrow $1,000 on a payday loan, you may owe as much as $4,000 when the loan becomes due. Who can afford that? A personal loan has a much more agreeable rate. You can find them as low as 5 or 6% if you have good credit, and even if you have terrible credit, you can probably find a personal loan at 20% or so -- which sounds high, but is so much better than a payday loan rate.
Personal loans don't require the lender to have access to your checking account.
Usually, when you take out a payday loan, there is a requirement that you give the lender your bank account information. If you do not pay, they will seize the money you owe from your account. With a personal loan, you do not have to give the lender such access. You should absolutely seek to pay your loan on time, but if something happens and you are late, you do not have to worry about your lender snatching money out of your account.
Personal loans help build your credit.
Payday loans don't generally go on your credit history; personal loans, however, help you build up your credit score since they are usually obtained from lenders who report to credit bureaus. If you need to improve your credit, taking out a personal loan and making on-time payments will help raise your score so you can get better rates on future loans.
Head to a bank or credit union, and apply for a personal loan today. It may take a few days to have your loan approved, but if you can manage to wait for the money, the terms are so much better than with a payday loan. You can contact experts like US Community Credit Union for more information.