Personal loans Vs payday loans

A Lego man giving money to another Lego man.

Since I went freelance having left the job that was making me miserable, I’ve been much happier but also significantly poorer! I’ve therefore become much more aware of finances and will admit that I worry about making enough money. With another baby on the way, we’re going to have to consider moving to a bigger house before too long so, at some point, we may need to consider taking out a loan.

It’s useful then that the friendly folk at TSB asked me to write a post about how a personal loan can be used and why it’s a more sensible option than a payday loan. So what makes personal loans a wiser choice?

Look at the rates

First things first, just look at the rates of the two different options side by side. Many leading payday loans have an APR of well over 1,000% which, to my mind, is extortionate. The representative APR on personal loans, however, can be under 5% – TSB’s can be as low as 3.9% for example. If you borrowed the same amount of money from a personal loan provider and a payday lender, you’d obviously end up spending much less with the former.


Payday loans are basically designed to be quick-fix solutions for people who need money fast. With the high APR mentioned above in mind, they’re far from ideal if you’re not going to be able to pay them back quickly. Personal loans, on the other hand, can be easier to manage over a longer period of time.

Credit rating

If you fall behind with loan payments, one of the consequences is that your credit rating could be affected. If you’ve taken out a personal loan, it’s more likely that you’ll be able to keep on top of your payments and not have to worry about this happening.

Be realistic

It’s vitally important to be in control of borrowing, so I personally think the best approach to loans is to take out relatively small amounts with the aim of paying them back within months rather than years. Taking out a huge loan that I wouldn’t be able to pay back without getting a full-time job again would be foolish so, if we need to take one out, we will borrow enough to help us complete any improvements to help us sell our house.


It’s a no brainer for me – personal loans are a much more sensible option. While it can be tempting to go for something short term, it makes sense to look at the bigger picture and ask yourself how long it will take you to pay off the loan.

Disclosure: this post was produced in collaboration with TSB.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.