Loans can be complex to beginners. If you’ve never made a big purchase like buying a house or car, you may not know how various loans work. Two basic types of loans are payday loans and bank loans. One basic and obvious difference between the two is that you get a bank loan from your bank or credit union and a payday loan from a payday loan lending company. But, there are a few more critical differences between the two. 

· Amount of money loaned: To start, payday loans are for far less than bank loans. The typical payday loan amount is between $100 and $1,000, since it is meant to be a sort of advance on a paycheck. Personal loans from a bank vary widely in value depending on credit history, income, and purpose of the loan, but the minimum amount can be anywhere from $1,000 – $10,000.

· Term of the loan: Payday loans are meant to be short term loans, usually just for 2 weeks until your next paycheck comes in. But, they can be dragged out considerably if not paid back quickly. Bank loan terms can vary from 30 years for a mortgage, to 5-7 years for an automobile, to 1 year for a personal loan. Generally, the more money the loan is for, the longer the term of the loan.

· Interest rate: Payday loan interest rates can be exorbitant. The average yearly payday loan interest is around 400%, but since they are only supposed to be for 2 weeks, the interest isn’t so high at around 15%. Personal loans from banks have a much less volatile interest rates since they are supposed to be paid back over a year or more. You will find rates from 6% – 36%, depending on credit history, income, and other factors. 

· Ease of obtaining the loan: Payday loans are extremely easy to get. All you need to provide is proof of age, an open bank account, proof of income, and your phone number, and you will walk out in a matter of minutes with cash in hand. With bank loans, it can take days or weeks for the bank to review your application, approve your request, and get you the funds. Personal loans are not generally given to those with bad credit or low income. 

· Riskiness of the loan: Due to the high interest rates, payday loans can send you into a downward financial spiral in the blink of an eye if you don’t pay. If you can avoid them, these types of loans are never recommended except in the case of a real emergency. With bank loans, you have more time and more options to consider. You can always refinance or restructure the loan to give you some breathing room. 

Personal loans from banks are always a better option than payday loans, if you are trying to choose between the two. Payday loans are just so dangerous because of the stacking fees every time you can’t pay. But if you find yourself caught in a payday loan trap, don’t lose hope – Progressive Debt Relief can help get you out. We have developed relationships with many of the top payday loan companies, so we know how to negotiate with them to get you a reasonable plan for paying back your loan. 

To get started, please contact us at 1-877-590-1847 for a free consultation.