Payday Loans vs Personal Loans: What Military Members Should Know

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Navigating the world of loans can feel as daunting as preparing for a mission. The type of loan you choose can have a big impact your repayment process, affecting your financial standing. But fear not! Our military bank is here to clarify the differences between payday loans and military personal loans. By the time you finish this overview, you'll be equipped to make the best decision for your needs, whether it's funding a home renovation or handling an unexpected expense.

Understanding Payday Loan Basics

Let’s start with everything you need to know about payday loans:

What is a Payday Loan?

A payday loan, also known as a “cash advance” or "check loan,” is a short-term, high-interest loan meant to cover urgent expenses until your next paycheck. These loans are commonly available through payday lenders, check-cashing services, and online platforms. Payday loans are easy to obtain and fast to process, making them a popular choice for urgent financial needs. However, they come with specific conditions.

Pros and Cons of Payday Loans


  • Fast Funding: You usually receive the money in 24 hours or less.
  • Simple Approval: They have more laidback credit checks, which means quicker approval.
  • Brief Duration: The commitment is typically short-term because repayment is due within a couple of weeks.


  • High Interest Rates: According to the Consumer Financial Protection Bureau, the APR (Annual Percentage Yield) for payday loans can be very high, often more than 400%.
  • Short Repayment Time: You must pay back the loan quickly, usually within 2 weeks. This leaves you with limited turnaround time to find money for repayment.
  • Debt Cycle Risks: The high fees and short terms of payday loans can put you in a cycle of debt. For example, there are late fees, rollover fees, returned payment fees, etc.

Who Might Benefit from a Payday Loan?

Payday loans might be an option for service members who need a small amount of money quickly and are able to repay it promptly. However, due to their high costs and risks—and the fact that they are banned in many states—payday loans should be seen as a last resort. It is important to recognize that these loans can cause major financial issues if not handled carefully.

Understanding Military Personal Loan Basics

Now that we understand payday loans, lets unpack the basics of personal loans, which can be a smart alternative.

What is a Military Personal Loan?

A military personal loan is a loan that lasts for medium to long terms and is available at banks, credit unions, and online lenders. The loan amount can vary from a few hundred to several thousand dollars and may be secured or unsecured. In the armed forces, a military personal loan is sometimes called a “military loan,” “personal military loan,” or “armed forces loan.” Regardless of the name, personal loans can help military families in several ways, which we will cover shortly.

Pros and Cons of Military Personal Loans


  • Lower Interest Rates: Interest rates for personal loans are typically much lower compared to payday loans, especially for those with good credit.
  • Predictable Monthly Payments: Having fixed monthly payments makes budgeting and financial planning more straightforward.
  • Flexible Repayment Terms: These loans offer extended repayment periods, ranging from 6 months to several years.


  • Stringent Approval Requirements: Personal military loans typically require a good credit score and proof of income, which can be challenging for some applicants.
  • Funding Time: It may take a couple of days to receive your money after approval.
  • Potential Fees: There might be some fees to keep in mind, like origination fees and prepayment penalties. Origination fees usually cover the cost of processing your loan, while prepayment penalties can happen if you pay off your loan early. These can add to the overall cost, so it's good to be aware!

Who Might Benefit from a Personal Military Loan?

In the military community, personal loans are well-suited for individuals with a solid credit score seeking larger loan amounts and extended repayment schedules. They are also perfect for consolidating debt at lower interest rates, funding home improvements, managing medical expenses, covering the hidden costs of your next permanent change of station, or financing major purchases.

Differences Between Payday Loans and Personal Loans

How are payday loans and personal loans different? Here are the primary distinctions:

1. Interest Rates and Costs

  • Payday Loans: Very high-interest rates, sometimes exceeding 400% APR (Annual Percentage Yield) according to the Consumer Financial Protection Bureau.
  • Personal Loans: Much lower rates, typically between 5% and 36% APR. While there are origination fees, they are usually much lower than payday loan fees.

2. Applying and Eligibility Criteria

  • Payday Loans: Minimal credit checks and quick access.
  • Personal Loans: Have a more detailed application process, requiring good credit scores and proof of income. This can take a few days to process.

3. Credit Score Impact

  • Payday Loans: Usually don’t affect credit scores unless a payment is missed.
  • Personal Loans: Can positively or negatively affect your credit score based on you manage repayments.

4. Payment Conditions and Flexibility

  • Payday Loans: Short repayment terms, typically due by your next paycheck, making them less flexible and more risky.
  • Personal Loans: Longer repayment periods, providing more manageable monthly payments.

What Loan Should I Choose: Payday Loan or Military Personal Loan?

Understanding the distinctions between payday and military personal loans can greatly reduce financial stress and save you money. While payday loans may seem handy, they often trap borrowers in a cycle of high fees and more debt. Meanwhile, personal loans are a great alternative and wiser choice for most financial situations.

For military families considering a military personal loan, Armed Forces Bank offers the Access Loan with specialized options. It comes with competitive interest rates and flexible terms tailored to help veterans, active-duty service members, military spouses, and their families throughout financial challenges.

Ready to take charge? Apply for one of the best personal loans for military members today and make the right choice for your financial well-being!


Member FDIC

Subject to credit approval. Restrictions Apply. Direct deposit relationship required. Origination fee applies, 10% or $100 whichever is less. Annual Percentage Rate (APR) is based on credit score. Only one personal loan allowed to any borrower at any time. Loan terms are based on the loan amount.