What is the difference Between A Payday Loan and Installment Loans?
Payday loans tend to be under $1000 with the average being between $300 and $500, but in some instances, payday loans may exceed $1000.
The loan is repaid when the next paycheck arrives and is settled electronically via bank transfer or via a post-dated check.
If the borrower cannot pay the agreed amount off then a payday loan can be rolled over into the following month. Note that this will be very expensive because of the effect of compounding interest and should be avoided.
If you are sure you will be able to repay the loan on your next payday and you require under $1000 you can go straight to our payday loans online section.
Installment payday loan
Range from small amounts around $200 up to tens of thousands of dollars and are not intended to be repaid in full at the next payday. Monthly repayments are extended over a period of time.
A borrower should consider this option if they have larger expenses or needs as the interest is lower than a payday loan. The direct lender will look at your personal circumstances, credit score, and annual salary to see what you can afford to pay back.
Further questions maybe be asked about your work situation, how long you have been employed, by whom to determine your ability to manage your repayments.
Bad Credit Score
A vital element of these loans is your credit score so if you know in advance that you may be applying then you stand a much better chance if you pay attention to this ahead of your loan application.
There are plenty of credit score tools online like Experian that can give you this information.
These loans are useful for purchasing more expensive items or services such as building, cars, education, white goods, paying down existing higher interest debt and so on.
Note that it rarely makes sense to borrow to buy a depreciating asset. You should borrow when you use the money to increase your productivity.
If you already have too many payday loans you may want to consider a more relevant kind of tool to help you back to solvency: Our payday loan consolidation plans that both attempt to reduce your overall debt burden and should result in smaller interest payments.
Pros of Installment Personal Loan?
Loan repayments are set up in advance so you know the amount you will be repaying with a fixed rate of interest, the payments remain constant and you can calculate what you exactly need to pay back from your next paycheck.
Note that these long-term loans may also carry a higher interest rate than other loan types so it is important to stick to your repayment schedule to avoid penalties and compounding interest on top of interest.
From the time you submit your application until you funds can be as low as a few days once your application was successful.
Cons of Installment Personal Loan
Payments are higher than traditional loans but not as high as a payday loan but please do your homework and compare both as by the time you have repaid in full with all interest and fees it may have been better just to take out a payday loan in the case where you only needed the money for a few weeks.
If you begin to miss deadlines for payments, this can result in larger fees and sanctions that can really increase the cost.
In some cases loans may be secured on your assets, if you fail to pay then these can be seized in order to pay off your debt.
Which type of Loan is suitable for you?
So summarizing the above you must think how much you need and for how long you need to borrow for in an almost instant payday loan. Is it for a quick 1 or 2 weeks or do you want to pay back over months?
Obviously, for a larger amount and longer periods, you should probably go for an installment loan.
Is your credit rating bad?
In this case, you are more likely to be accepted for a payday loan.
Can you manage the payments? Be honest with yourself and think if you really need to purchase the required goods or service and can you afford the monthly payday installments.
Take your time to consider all options and remember it’s not good to borrow and to buy something that will not increase your earning power.