Personal loans vs payday loans: What is the difference between the two? MintGenie explains

livemint.com:

emergency fund or selling investments. An alternative option is to explore loans from banks or other financial institutions such as NBFCs. However, the decision between opting for a personal loan or a payday loan depends on various factors and should be made after carefully considering your ability to repay the loan within the given timeframe.

In nearly every scenario, a personal loan is a preferable choice over a payday loan. Here’s why: Here are some alternatives to consider before turning to a payday loan: Payday loans should be considered a last resort due to their high costs and the risk of trapping you in a cycle of debt. If you’re contemplating a payday loan, a personal loan is a far better alternative, provided you meet the qualifications.

Payday loans can be risky for several reasons, and it’s crucial to understand these risks before contemplating one. Here’s an overview of the main dangers: - Exorbitant interest rates - Brief repayment period - Cycle of debt There are certainly some prevalent misunderstandings about how personal loans affect your credit score. Here are two of the most common ones: Key factors to consider when obtaining a personal loan to enhance your credit score include: - Temporary decrease: Applying for a personal loan results in a hard inquiry on your credit report, which can lead to a minor, short-term drop in your score (typically a few points).

- Long-term advantage: The positive effect stems from consistently making on-time payments. This showcases responsible credit management and can substantially boost your score over time. - Loan amount: Only borrow an amount that you can genuinely afford to repay punctually.