What are Personal Loans?

Personal loans are generally long-term loans for personal or family goals like wedding or home improvements or to consolidate several debts at once. You are free and flexible to use the loan amount for whatever purpose you need. These loans are sanctioned on the basis of the borrower’s credit history and the ability to pay it back from his personal income. Usually, personal loans are repaid through fixed monthly installments over a fixed term.

What are Payday Loans?

Payday loans, also known as Short-Term Cash Loans are quick approval loans that can be sanctioned instantly and with a short repayment tenure. People go for payday loans when they are in urgent need of money and the next salary day is still far. With little or no credit check, payday loans lend money immediately at a cost usually higher than personal loans. The pay-out structure might vary depending on the lender and you may avail the loan amount either by cash or via debit card or as a direct deposit into your bank account. Some lenders also offer a rollover if you cannot clear the obligations of the loan within the stipulated term period. There is an additional fee for rollover and the overall cost of the loan goes much higher.



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Personal Loan vs Payday Loan

Loan Amount

Payday loans generally lend lower amount ranging from about Rs. 5000 to Rs. 1-2 lakhs. Whereas personal loan amount ranges from Rs. 50,000 to Rs. 50 lakhs.


Personal loans are provided by banks, credit unions, NBFCs, and online direct lenders. Payday loans are offered only by online lenders who specialize in particular products.


Personal loans are generally unsecured unless you offer an asset as a collateral. For people with poor credit opting for personal loans, the lender may ask for a creditworthy co-signer. Payday loans are secured with either a post-dated cheque to the lender or by authorizing them to withdraw the sum you owe. In extreme cases, the payday lenders can directly claim your wages to collect the money that you owe. They need a court order to do so.


There are generally strict eligibility criteria for personal loans wherein the lender checks your credit score, regular income, and repayment history. For payday loans, it is relatively much more flexible and people with bad credit score can be considered as well. As long as you have your ID proofs, bank account, and a proof of income, you are eligible for payday loans.


Personal loans are cheaper for sure, but the approval process is time consuming. The overall cost for a personal loan would depend on factors like:

  • The term duration of the loan
  • Whether or not you are offering any asset as collateral
  • Your credit history

In payday loans, while you enjoy quick approval, you end up paying extra cost for this convenience. Rate of interest on personal loan ranges from 10% to 35% depending on the profile of the borrower and the terms of the lender. Whereas the rate of interest on payday loan ranges from 30% to 40% again depending on the loan amount, lender, and the borrower’s profile.

Loan Term

Payday loans are much shorter in term, ranging from a few days to a year, depending on the loan amount. On the other side, the term for personal loans ranges from 3 months to10 years. You can use a personal loan calculator to compare the repayment options for different loan amounts.

To Decide Between Personal Loans & Payday Loans

While you are now aware of the major differences between the two, you must do your groundwork or base research before shortlisting the best loan option for you. Following are the three main points you should consider before selecting between the two:

The Need

You must first understand and analyse your need for money. Apart from the amount you require, you must also think about how fast do you need it.

Credit History

If you have good credit history, you can give priority to the less costly personal loans. However, even with good credit history, if you are in urgent need of cash, you may have to go ahead with payday loans online.

The Cost

It will eventually come down to the monthly amount and the total repayment amount. Use the online calculator options provided by lenders to make sure that the overall terms and repayment amount is within your budget.

The Final Verdict

Overall, the interaction of borrowers is much more positive with the payday lenders as the whole process is less taxing and stressful. It is much better a process than going to a traditional financial institution and getting embarrassed by being denied. However, with a much higher than usual interest rate, these loans are predatory in terms of the costs involved.   

Covering for the emergency situations or urgent need of money can be difficult and stressful. However, there are various types of loans that you can surely apply for based on your profile, necessity and urgency. You must do your due research in terms of the best options available and in order to understand what you’re getting into and how will you manage the debt and repayment. Personal as well as Payday loans have their own pros and cons. However, the lending options at PaySense are much superior in any way you look at it. With our innovative lending platform, you can instantly avail personal loans of up to Rs. 2 lakhs with features like quick disbursal, one-time documentation, and no hidden fees. It’s almost like a dream when you can customize your personal loan on your own terms with flexible EMI options exercising complete control of what and when you pay. The application process takes only minutes to complete and if you meet the eligibility criteria, the loan is disbursed within a few hours on the same day. Through our app and website, you can apply for personal loans within a few seconds from the place and time of your convenience.