When you are in need of emergency cash, it is easy to become overwhelmed trying to keep and comparethe never-ending options in mind. Two of the most common choices are payday loans and guarantor loans. These two are very different loan products even though both are designed to help you with financial struggles. Understanding the differences between the two types of loans will help you make a better choice.
These are more suitable for when you are in need of immediate and small amounts. In short, it is more of ‘quick fix’ type that can help you fix your temporary financial problem. The following points will help you differentiate between the two types of loans:
- Credit worthiness and income security are considered enough factors for eligibility to secure a payday loan.
- The amount of loan usually ranges between £100 and £
- The income payment for the next month secures the borrower for payday loans.
- Payday loans can be used by borrowers to preserve their credit history.
- Payday loans are actually the cash advancement that helps an individual meet financial emergencies and expenses.
- People who are 18 years or above and employed are eligible for this loan. Home ownership is not necessary for eligibility.
- Some companies offer 15-30 minutes of approval time and transfers cash online at the time of need.
- The duration of payday loan is usually 30 days unless additional cost is paid for extended period.
- The fees for payday loan are not based on interest rates in the market but the late payment and overdraft charge of fee.
These are long-term personal loans that allow you to borrow higher amounts and pre-decided repayment terms. While the definition itself clearly distinguishes between the two loan types, the following are some more factors you need to know:
- The credit worthiness of the borrower is not taken into consideration for this type of loan. In fact, it is the financial security provided by the guarantor that vouches for the borrower and his or her ability to repay the amount.
- The guarantor him/herself is the credible security against the loan amount borrowed. This is sfor both short and long-term loans.
- The amount of loan may vary, depending on how long you require repaying it and how credible the guarantor is.
- The guarantor must be a mature adult usually the age of 23 or above and must be a homeowner to stand eligible for the loan deal.
- The duration of the loan may also vary and can be up to several months.
- Guarantor loans can be acquired for various personal reasons including business, education, or other personal requirements.
- The interest rate is applied according to the market.
- Guarantor loans are often used by borrowers in need of money but have a poor credit history.
- Different criteria for short or long-term lending may apply.
While both loan options will help you get out of your financial emergency, which one of these will benefit you more depends on your current financial circumstances and borrowing needs. So asses these factors properly before you make your decision.