PERSONAL LOAN VS. PAYDAY LOAN IN INDIA—A DETAILED COMPARISON
A health emergency, a crucial family obligation, a temporary cash crisis, a vehicle breakdown, or a relocation—when they occur unexpectedly, situations can become highly stressful.
A health emergency, a crucial family obligation, a temporary cash crisis, a vehicle breakdown, or a relocation—when they occur unexpectedly, situations can become highly stressful. Arranging funds quickly feels overwhelming. Delaying or taking longer can make things slip out of your hand. In such critical times, quick loans come as a lifesaver.
Personal loans and Payday loans are increasingly becoming popular as quick loans due to their efficiency, transparency, and credibility. Nevertheless, they hold significant differences in terms of how they work. As a borrower, if you’re considering taking one of them, knowing which fits your needs perfectly is key. We have outlined Personal Loan vs. Payday Loan in detail below.
A Head-to-Head Differentiation Between Personal Loan and Payday Loan
A quick glance at the key differences helps you understand what works best for your personal needs.
Loan Size—From a loan size point of view, Payday loans are small-ticket loans with amounts stretching up to 50,000 or more(depending on the lender). Conversely, Personal loans offer way more credit amount depending on your eligibility. In conclusion, Payday loans can cater to mini expenses, while Personal loans are ideal to cover larger expenses.
Rate of interest—Compared to Personal loans, Payday loans have a higher rate of interest.
Repayment period—Payday loans typically have a short repayment period, stretching for a few days, weeks, or sometimes months. In contrast, Personal loans offer a longer loan duration.
Processing time—Both loans typically have a significantly shorter processing time, with ultra-fast approvals and disbursals. They’re designed for emergencies, allowing borrowers to access funds without a waiting period. For instance, SuryaLoan is an RBI-registered NBFC that offers both Personal and Payday loans in just 10 minutes.
Required documents—Although both loans are primarily known for lightning-fast approval and minimal paperwork, Payday loans still have an edge over Personal loans in terms of documentation. All you generally need are basic documents like PAN, Aadhaar, a salary slip, and Bank Statements to procure one of them.
Risk factor—Since Payday loans typically have a very short repayment period (to be repaid by the next paycheck) and a high rate of interest, late payment leads to hefty penalties that can disrupt your peace of mind. In contrast, personal loans mean longer financial obligations. Most importantly, such a loan is directly linked to the CIBIL score. So, the inability to repay on time leads to a significant drop in CIBIL and negatively impacts your overall credit profile.
Qualification criteria—Payday loans can be qualified for based on income and basic verification. On the other hand, a personal loan involves slightly more approval criteria, such as credit score, income, and repayment capacity.
To precisely understand which loan is better, you first need to evaluate how much you need for how long, and whether it fits your budget. This Personal Loan vs. Payday Loan clearly breaks down the core differences and depicts that choosing one of them depends on your purpose and creditworthiness.