Payday and Installment Loans: Which Is Better?
The principal difference between payday and installment loans is that the former are paid in one large amount, while the latter are credited back in planned monthly payments. But when it comes to the choice of the most profitable variant, the picture becomes less distinct.
Features of Online Payday Loans
As a rule, this type of loans is borrowed from loan agencies, which can be found in every city. In recent times, there has appeared a variety of online payday loan companies. Their interest and fees are quite high, but people still find them very helpful. Payday loans do not imply any financial support. The client’s next paycheck plays the part of credit support. Along with the initial sum, the borrower pays out the interest and the commission.
Pluses of Payday Loans:
- Affordability. Such loans are issued to every consumer with a stable job.
- Speed. You can get the sum you need in 1-3 days: just fill in the application or request form, wait for the lender’s approval, and receive the money.
- Convenience. The lenders offering payday loans can be found in many localities. Besides, there are lots of online companies providing payday loan services to different clients.
- Extra options. The loans of this type have flexible terms, this is why people refer to them when they need money, but cannot use any other credit services.
Minuses of Payday Loans:
- Expensiveness. Their interest rates are recognized to be the highest.
- Scam lenders. You can easily become a victim of swindlers; this is why it is essential to know you’ve chosen a reliable company.
- Payday loans can become cyclical. Some people apply to their next paychecks to refund their current loans, as they are out of cash for every following payment.
Features of Installment Loans
These are short-run, unfunded loans with comparatively high percentage rates. The borrower has to make a series of payments and pay out the loan over a predetermined period of time. This category of loans includes mortgages and car loans, as well as the broad group of unsecured loans, when a consumer has no collateral to guarantee the loan.
Pluses of Installment Loans:
- Pre-arranged monthly payments. Such loans have an established size of interest and a certain schedule of payments.
- Longer terms. The loans of this type are quite long, as monthly installments demand more time.
- Convenience and easiness. It will take you 1-3 days to receive an installment loan.
Minuses of Installment Loans:
- Heavy percentage. It is not as high as in the case of payday loans. Though, in some cases a borrower has to waste even more money, as the payments are distributed month to month.
- Extra charges for payments arrears. If you fail to pay out in time, you might be issued a penalty charge.
- Requirement for security. In some cases such loans require a client to provide security.
What Is the Difference between Installment and Payday Loans
- The size of payday loans varies from 1000 to 1,500 dollars. As for installments loans, their range starts from 1.5 hundred dollars and may be as high as several thousand dollars.
- Installment loans are long-term; they are refunded during several months. The loans of the second type are paid back in 30 days.
- In order to refund a payday loan, a borrower uses post-dated checks. Installment loans are withdrawn directly from the client’s account or paid out with checks.
- The annual percentage rate of a payday loan can amount to 390% (depends on your State and loan amount). In case of an installment loan, this figure varies from 25 to 100 per cent.
- Installment loans can be both secured and collateral-free. Payday loans imply no security at all.
- A borrower can renew a payday loan by the due date. As for the second type of loans, they can be extended every few months.
Which Loan to Choose?
In order to hit the right answer, think about the following issues:
- How much money do you need? How long are you going to use it? For smaller sums or quick expenditures you might consider payday loans. If you want to receive a larger amount of money and refund it piece by piece, decide on an installment one.
- Do you have a good credit rating? This factor makes no matter when you take out a payday loan. But in case of an installment loan, it might be of great importance.
- How are you going to make repayment? Payday loans imply that you receive a small sum of money and give it back at once. But if you need a larger sum, and it will be difficult for you to refund it all at once, consider installment loans with their “fragmented” installments.
- Will it improve or hurt your credit rate? Your credit reputation can be seriously hurt, if you fail to liquidate either of these loans. At the same time, when you refund a payday loan, it won’t definitely improve your rate. But your credit reputation will surely become higher, if you make all your installments on time.
In order to choose the most suitable type of loan, analyze your current financial standing and think about what exactly you need at the moment.
At the same time, you can find direct lender of a payday or installment loan in your state with our simple and secure online form and discuss loan terms directly with one of our lender.