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Short Term vs Payday Loans

If you need to borrow money, you have two options: short-term loans and payday loans. Before you submit your request, you should know the differences between these two financial products.

What is a payday loan?

A payday loan is a short-term, unsecured loan that must be paid off on the day you get paid. Your income may be from the employer or government. Payday loans are perfectly suited to consumers who need funds right away or within 24 hours. If you applied for a payday loan, you should expect to have the funds in your bank account within a few hours. You will be accepted even if you have a bad credit history. Generally, payday loans have many pros: there is no need to provide collateral, the process involves no paperwork, eligibility criteria are relaxed. Often, a payday loan is the only way out for some Americans who need to borrow cash immediately.

Are short-term loans the same as payday loans?

In fact, payday loans are smaller loans provided for shorter periods, while short-term loans allow consumers to get more money and may be repaid within months or even a year.

The key difference between short-term loans and payday loans

The major difference between these financial products is the number of repayments you need to make. You usually repay a payday loan within 1-3 weeks in one lump sum. A short-term loan is typically repaid in a period from 2 months to 1 year.

Both loans have similar eligibility criteria:

  1. be of legal age;
  2. have a steady income;
  3. have a valid bank account;
  4. have a phone number and email address.

Are payday loans more expensive?

In theory, payday loans are more expensive. But since such loans are issued for shorter periods of time, they are usually cheaper overall as you pay off your debt quickly and have less time to accumulate interest. But the APR is always individual for each borrower. It will be specified in your loan agreement.

Actually, payday loans and short-term loans have similar interest rates. The key difference is the lending period.

How to apply for a payday or short-term loan

These financial products have the same application procedure. In both cases, you will need to:

  1. Go to;
  2. Fill out a short application form;
  3. Get matched with the best lender;
  4. Wait for final loan approval;
  5. Review the loan offer and read the loan agreement;
  6. E-sign the agreement;
  7. Get the money.

What product should I choose?

  • Payday loan – if you need to borrow $100-$1,000 for a few days or weeks, this could be the best option;
  • Short-term loan – if you need a larger amount of money for 2-12 months, choose this product.