Comparing Bank Loans vs. Payday Loans

Bank Loan vs Payday Loan

When applying for a small amount of money, the contest comes down to bank loans vs. payday loans. Which side will you fall on? That depends on your financial situation and how soon you need funds.


Banks take time to process applications. They look into an applicant’s credit rating. They have to call references and make sure that a client is going to have the funds to pay off the loan eventually. If you need money right now to get supplies for your kids as they go back to school, pay medical bills, or fend of creditors seeking payment against a credit card bill, the time it takes for a bank manager to make a decision is too long.

Payday loans take less than 24 hours to process. Whether you are accepted or rejected, you will know in that amount of time or less. Most of the time, money is in your account within hours of applying for a loan of anything from $100 to $1500 dollars, sometimes more.


Banks are open during business hours, usually 9 to 5. Some offer late opening hours one night of the week. There are certain branches which provide Saturday opening times until about lunch time. Big cities are moving towards banking seven days a week to satisfy customers and compete with online banking institutions.

Payday loans are available 24/7. You could apply for a loan after work one night when you have a chance to take a breather and wake up to discover that you were not only accepted, but the money has been automatically transferred.


The rate of rejection at banks is higher than it is at payday loan centers. Banking staff take your credit history into account, not just your current wages and employment status. You might have tried hard to be careful with money, but ended up facing bankruptcy. When you defaulted on your mortgage, your credit rating plummeted.

Payday lenders are not concerned about our credit rating or history. All they want to know is ‘can you pay off this debt in a month or less?’ That is the longest most employers go between paying their employees, so any client with a regular pay cheque should be able to qualify for a loan in most places if he or she is over the age of 18.


This is where the bank gains some footing against the payday loan shop. Banks charge interest rates against their loans. These add up over time, but they are still considerably less than the fees charged by payday loan companies. A payday loan fee amounts to 20% of the sum borrowed, sometimes more. A bank will select a rate based on current interest rates, which will certainly be less than half, maybe even below a quarter of this amount.


Look at your own financial situation. Do you need money now? Is your credit rating poor? If so, then a payday lender will be able to help you get back on your feet.

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