With all of the loans available at present, loan terminology can be confusing. A personal loan is from a bank or building society, and it can be used for whatever one wishes. Many use this term for payday loans or cash advances from a credit card, and while in general it may be similar, the term "personal loan" should be used specifically for the loans one receives from one of the types of financial institutions previously mentioned. Four of the most important differences regarding a personal loan, as opposed to a payday loan or cash advance from a credit card, are availability, amount, timeline, and interest rate.
In order to receive a personal loan from a financial institution such as a bank, you must prove that you do not prove to be a credit risk to the lender. It is because of the bad credit of so many that payday loans have become so popular and continue to become more popular. And while this low credit risk qualification may keep many from obtaining a personal loan, those that are in the position to apply for such a loan should consider it before the other two options mentioned.
The timeline for a personal loan from a bank, or another similar type of lender, is much longer than a payday or a cash advance loan, as far as how long it takes to get the loan and how long you have to pay it off. An average example of the life of a personal loan is three years. With a payday loan, the loan must be repaid with the next paycheck. A cash advance from a credit card is best paid off as soon as possible, because interest usually begins accruing from the day you get the money (and not after the first due date as with credit card purchases). Also, credit card companies often use your payments to lower your purchase-credit first, allowing the interest owed on a cash advance to grow.
Finally, the issue of interest rate must be raised. In general, the more risk you pose, the higher the interest that you will be charged. As has been mentioned, if you are not qualified for a personal loan and have decided to use a payday loan or cash advance, the interest will be higher simply because of the demand.