Personal loan vs. payday loan
Payday loans carry triple-digit APRs and short terms that trap borrowers in renewals. Personal loans typically cost far less, offer fixed payments, and avoid the cycle of rollovers.
Cost comparison
| Feature | Personal loan | Payday loan |
|---|---|---|
| APR | Usually lower, fixed | 300–400%+ effective APR |
| Term | Months to years | 2–4 weeks |
| Payment | Installments reduce principal | Lump sum due; often rolled over |
| Fees | Possible origination | Flat per-$100 fees that balloon effective APR |
Why payday loans become a trap
- Full balance due on payday causes a cash shortfall.
- Borrowers re-borrow or roll over, adding new fees each time.
- High cost and short terms make it hard to escape the cycle.
Better alternatives
- Small personal loans with fixed payments and no prepayment penalty.
- Credit union Payday Alternative Loans (PALs) with capped fees.
- Employer advances or earned-wage access programs.
- Negotiating payment plans with billers, or using community resources.
FAQs (top questions)
How bad is payday loan APR really?
Fees of $15–$20 per $100 for 14 days equate to 300%–500% APR.
Can a payday lender garnish wages?
They can pursue collection and, if they win a judgment, garnish wages depending on state law.
Will a payday loan help my credit?
Generally no; many do not report positive payments but may report defaults or send to collections.
How quickly can I get a personal loan instead?
Some online personal lenders fund as fast as the same or next business day.
What if my credit is weak?
Check credit unions, co-signer options, or secured personal loans; all typically cost less than payday loans.
Internal Links
- Review emergency loan options that beat payday APRs.
- See loan terms to avoid before borrowing.
- Learn repayment strategies to get debt-free faster.
External resources
Conclusion
Payday loans are costly and risky. A personal loan with fixed payments and lower APR—or a credit union PAL—protects your budget and helps you escape the debt cycle. Avoid rollovers, and seek safer options first.
Need a safer alternative?
Compare personal loan offers and credit union options before turning to payday lenders.