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Difference Between A Payroll Loan And A Personal Loan

To access credit there are several options such as cards, mortgage loans, personal loans and payroll loans. Here we tell you what is the difference between the last two and which one is best for you.


The main difference is that a payroll loan is deducted directly from the biweekly or monthly payment that they make you at the company where you work. It also has several advantages:

  • You do not require an endorsement since the payroll works as a guarantee that you will pay on time.
  • For this reason, the financial institutions that offer this type of loan tend to have much more competitive interest rates.
  • You avoid being aware of the payment date or incurring delays because you forgot to cover the corresponding amount.
  • Nor do you have to be going to a branch to make payments, thus saving you time and avoiding lines.
  • Loan approval is usually much faster.

On the other hand, personal loans are processed directly with the financial or bank entity, they are not insured via payroll, so the interest rate may be higher and you will have to be aware of the payment date to do it directly with the institution.


Both credits are just as convenient, but there are some points that you should review before choosing one or the other :

  • The interest rate. Compare the interest that each of the loans will charge you, this is what you will be paying for the financing they grant you.
  • The term. Perhaps the rate is not very different, but if the term is longer between one and the other, it means that you will be paying it for longer and that in the end it is more expensive.
  • The monthly payment. This goes hand in hand with the previous point, if the monthly payment is lower, but the term is much longer, in the end it costs you more. Compare how much you will be paying in total at the end of the loan.
  • Other commissions. Check if they will be charging you for account management, opening or if there is insurance included.


Regardless of the type of loan you are going to request, before doing so there are some recommendations :

  • Check that you can cover the credit payment in a comfortable way, it should not exceed 30% of your salary or you will begin to have problems to cover other of your expenses.
  • Ask if there is some insurance that you should cover in case of unemployment, or death, for example.
  • If it is a payroll loan, check how often it is deducted from your payment, whether biweekly or monthly, so you can have better control over the rest of your payment.

If you are looking for a loan via payroll, come to us. Our advisors can give you the best options without the need for an endorsement and without reviewing the Credit Bureau.

The Walking Mombie