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Direct payday lenders and banks offer two entirely different loans. Comparing the two is like comparing apples to oranges. However, knowing the pros and cons between direct payday loans and bank loans can help you decide which one is right for you. Both loans have their advantages and depending on your financial situation, one will be more appealing to you.

Direct payday lenders offer short-term solutions

If you need short-term financing and you don't want to be committed to a loan that could take years to repay, a direct payday lender provider offers exactly what you're looking for. They provide loans that can be used to get back on your feet financially. Of course, this comes with its own set of repercussions as well. With a short-term loan, you have to begin the repayment process almost immediately after you have received the loan. Within just a few weeks, the lender will expect you to have the loan paid off entirely. This can put significant constraints on your budget, especially if you haven't prepared to pay off the loan that quickly.

Banks offer much lower interest rates

Part of the benefit of going with a long-term loan option is that you will have a significantly lower interest rate. Interest rates typically range from 4% to 15% on bank loans, which is considerably less than what you would receive through payday lenders. In fact, some payday lenders charge more than 300% in interest over the course of a year. Since you repay the loan within just weeks, this rate doesn't affect you much, but if you were to get stuck in the payday loan cycle and have to delay your loan repayment or take out an additional loan, it could damage your finances.

Direct payday lenders offer an easy approval process

The main reason why payday loans have become so popular is because they offer an easy approval process. The loan application is very basic and there is no credit check at all. If you have damaged your credit in the past or if you have never owned a credit card, you can still qualify for a payday loan. Payday lenders offer incredibly convenient services for those that need a loan that is not dependent on their credit score. However, payday lenders do require that you provide up to date information on your employment status. If you are paid by check, you can provide the payday loan company with your pay stubs or bank records.

Banks loans offer low monthly payments

A bank loan is going to offer you a low monthly payment. You won't have to worry about your finances and you should have plenty of money left over in your budget to afford your bills and other financial obligations. Bank loans offer immediate financial assistance and you can repay what you owe slowly, over the course of a few years. This makes banks great for mortgages, small businesses, and even personal financing. Banks are generally looked at as the better option over direct payday lenders.