Published on Sept 2, 2021Updated on Oct 7, 2026
Opting for a loan is a convenient manner to finance expenditure that cannot be financed out of pocket. Today, there are a host of loans that you could opt for to avail of funds for any emergencies that may come your way. But does it matter which loan you choose to opt for? Different factors like interest rate, loan term are what differentiate one from the other. Knowing the difference between payday and personal loans can help you make better informed financial decisions for yourself.
Let us understand the meaning of these terms before understanding the difference between both:
A personal loan is an unsecured form of finance that is offered by lenders for any legitimate purpose. The funds are sanctioned as per the policy of the lender and are required to be repaid as per the terms and conditions laid down by the lending institution.
Payday loans are short-term loans, also known as advance cash that are sanctioned quickly. They are expected to be repaid within a short tenure and incur higher charges as compared to personal loans.
Let us understand the key differences between Payday Loans vs Personal Loans:
|
Particulars |
Personal Loans |
Payday Loans |
|
Loan eligibility |
Personal loans enable you to borrow finance up to INR 10 lakhs (based on your eligibility) which amounts to a larger sum as compared to payday loans |
The upper cap of your Payday loan is the salary amount. |
|
Tenure |
Borrowers can opt for a personal loan tenure of 12 to 60 months |
Payday loans require to be honored between two to four weeks duration, on the receipt of their paycheck. If borrowers are unable to honor the funds borrowed, they are required to renew the loan and the other associated costs into a fresh loan with a fresh set of fees |
|
Documents required to be submitted |
Potential borrowers are required to submit KYC documents, bank statements and income proof documents to verify their eligibility for the loan |
The basic and only eligibility criteria to apply for a payday loan is that the applicant should earn a steady sum of income equivalent to the sum borrowed and should be salaried |
|
Cost of borrowing |
Personal loans are offered at reasonable rates of interest starting from 12.5% per annum. Lenders may also levy a processing fee, insurance and service charges. |
Payday loans are approved almost instantly, however, they attract a higher rate of interest. Sometimes, the interest rate may also be calculated on a daily or weekly basis. |
The eligibility criteria for personal loan are basic and are designed in a manner that maximum people can apply for a personal loan to finance their requirements. The criteria are as mentioned below:
In addition to these factors, your income, existing loans, etc. are taken into consideration. Your disposable income should range between 70%-80% of your monthly income to ensure that your loan is approved without any hassle. Our personal loan eligibility calculator can help you arrive at an estimated maximum personal loan amount you can borrow for a given interest rate and tenure. Knowledge about how much money you are eligible to borrow will help in planning your finances better.
Must Read: 5 Ways to Save Money Through a Personal Loan
The following personal loan documents are required to evaluate your eligibility:
If you do decide to opt for a personal loan online, ensure that you honour your EMIs on time and in full to ensure that you maintain a good credit score. If you have any doubts regarding our application process, feel free to get in touch with our SMFG India Credit customer care representatives through phone, phone, email, or walk into any of our branches across the country.
Important Note: This article is for general informational purposes only and may be subject to change from time to time. As product features, eligibility criteria, interest rates, charges, fees, tenures and other terms may be revised as per SMFG India Credit's policies, readers are advised to refer to the latest details from the respective product pages (please select from the top menu). For the latest loan charges, please visit Charges & Fees Link and for the latest Interest rates, please visit Interest Rate Rationale. Please note that final loan terms, disbursement process and eligibility criteria will depend on SMFG India Credit's policies at the time of loan application.
The content of this article is for information purposes only and does not constitute as, an offer or advise to avail any products or services from, or, a commitment to grant any loan by the company. It is not intended to create any rights or obligations against us. All content is provided "as is" without any warranty of any kind, either express or implied & we disclaim any warranty or representation, whatsoever, in regards to the content. Please refer to the Privacy Policy of the company to understand the use, processing and storage of your personal data.
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