Payday vs Personal Loan – Which One is Right for Me?

Many people across the world are experiencing income loss owing to the Corona Pandemic.

The importance of institutions that provide short term loans is currently higher than ever.

What’s important is picking the right kind of loan amongst the available options to get through the rough patch. How to decide which one is right for you? There are multiple factors at play there.

Two of the most prevalent options in the market for short term loans are Personal Loans & Payday Loans. Personal Loans are term loans with moderately-high interest rates, while payday loans are short term loans with very high-interest rates.

Loan Term

The first thing to consider is tenure. For how long are you strapped for cash? Is it a matter of a few weeks until payday, or it’s going to last for longer than that despite getting your salary on time?

If it’s the former, a payday loan will be the appropriate option as personal loans have a minimum tenure of 12 months. If it’s the latter, then you can go for a personal loan instead of bearing the high-interest costs of payday.

Loan Amount

The second thing to consider is the amount. Payday loans are not advisable for high amounts because of the interest. The only scenario wherein one should go for a high-value payday loan is when they don’t have enough credit score to get a personal loan.

If one has the required credit score, a personal loan is more pragmatic. Payday loans are advisable when the loan amount is less than the minimum requirement for a personal loan.


The third thing to consider is how quickly you need the money. If there is an immediate purchase you need to make wherein the deal is time-critical, or it’s an emergency that can’t wait, payday loans are advisable as the time taken by lenders for approval is less. If the requirement is not time-critical, one should go for a personal loan to avoid the high interest.


For taking a personal loan of any amount, the applicant needs to have a minimum credit score required by the financial institutions. If the applicant doesn’t have that, payday loans are the only option.

If the applicant doesn’t have the credit score for a personal loan, a high-value payday loan isn’t advisable either. Mainly because in the case of default, interest amount can become multiple times the principal amount.


Whenever you’re borrowing money, a more conservative approach is advisable. Multiple factors like job stability, the likelihood of getting your salary on time, and the purpose of the loan are vital. But most importantly, you have to make sure that you don’t spend your hard-earned money paying more interest than you’re supposed to when a more cost-effective option is available.

Personal loans are advisable in most scenarios because of the higher amount, less interest rate, and lenient payment terms that provide cushion for contingencies.

A payday loan is a viable option when the amount is significantly small, or the situation is time-critical, and the applicant can’t wait for the personal loan to get approved.