Guarantor Loans Vs Payday Loans

Guarantor loans are quite different from payday loans. Guarantor loans are advanced to individuals exhibiting the ability to repay the loan and are able to provide a guarantor for the loan. On the other hand, payday loans are cash advance to employed personnel on condition that they will be paid on the next pay day.

Purpose

There is no limitation as to the use of both payday loans and guarantor loans. The use of the money remains a matter of choice to the borrower. They can be used for emergency situations or for a certain project that is underway. Their applicability in emergency cases comes in for the fact that they are given within a short term without delay.

Amounts And Repayment

Payday loans and guarantor loans differ in terms of the amount on offer and the repayment period. As for guarantor loans, amounts may range from £50 to £10,000 depending on whether it will be a short term or long term guarantor loan. The repayment period is also flexible in terms of guarantor loans as they can run for up to 72 months. However, in the case of payday loans, a smaller amount is given and the repayment usually runs up to the next pay day only.

Security And interest Rates

Guarantor loans are deemed more secure than payday loans. Guarantor loans warrant the presence of another signatory on the loan. Incase the borrower is not able to pay back the loan in full, the other party who is financially stable should step in. this however is not the case in terms of payday loans. The borrower is the only signatory in the loan. In case he is unable to pay back the loan, it will go in arrears. Since guarantor loans are deemed more secure, they have a lower interest rate charged on the loan. On the other hand, payday loans have a higher interest rate charge as they are risky loans.