When you're in an emergency financial situation and have
less than perfect credit, you might turn to either
payday loans, which are generally required to be repaid in a lump sum,
or installment loans, which are spread over a more extended
period. And even if you have no time to look for different
instant loans for bad credit
and how they work, it is advisable to learn the distinctions
between payday and installment loans to help you pick the
right loan for your financial situation.
If you need help comparing the features and benefits of both
payday and installment loans, we're here to help you out.
What Is A Payday Loan?
Instant, flexible, and convenient are some of the words that
lenders often use to describe payday loans, and this claim
does hold water to a great extent. A payday loan is nothing
but a short-term lending option for those who need quick
cash until their next payday. This is why payday loans have
short repayment terms and, in most cases, are meant to be
paid off in full by your next paycheck.
Payday loans are
usually used
during cash emergencies like paying an unexpected bill or
rent when your paycheck isn't enough. These loans are easily
accessible as they do not require credit checks. However,
the main reason why borrowers might resist opting for a
payday loan is that they notoriously have high-interest
rates.
What Is An Installment Loan?
Installment loans
generally need no introduction - they are one of the most
popular forms of credit. When you opt for an installment
loan, you agree to borrow a lump sum of money and repay the
principal
with interest over time. It makes perfect sense to use an
installment loan to finance your big purchases like a home
or vehicle.
Since you know how much you owe upfront in case of
installment loans, it can help you create your monthly
budget and plan your spending accordingly. Usually, secured
installment loans have lower interest rates than unsecured
loans and no prepayment penalties. A few examples of
installment loans include car title loans, student loans,
personal loans, auto loans, and mortgages.
What's The Difference Between Payday Loans And Installment
Loans?
Although payday loans and installment loans can prove to be
helpful when you need cash immediately, there are some
noticeable differences between the two based on a variety of
factors like:
|
Differentiating Factors
|
Payday Loans
|
Installment Loans
|
|
Purpose of borrowing
|
You can use a payday loan to cover your
short-term cash needs in between paychecks.
|
These loans can be used for both short-term
and long-term cash needs.
|
|
Interest Rates
|
Payday loan lenders usually charge
triple-digit annual percentage rates (APR).
This depends greatly on the state you reside
in.
|
In most cases, installment loans come with
lower interest rates than payday loans.
|
|
Use of Collateral
|
Being unsecured in nature, you won’t require
any collateral to be approved for a payday
loan.
|
An installment loan can either be secured with
collateral or unsecured where you don’t need
any collateral.
|
|
Loan Amounts
|
Payday loans allow you to borrow a small
amount of money, typically less than $1,000,
to help you promptly take care of emergency
expenses.
|
An installment loan can help you borrow more
money than a payday loan. Their loan amount
ranges from $100 to $10,000 depending on your
eligibility, state of residence, and lender.
|
|
Loan Terms
|
These loans have a short tenure of 10 to 31
days. If you borrow a payday loan, you might
have to repay it once you get your next
paycheck.
|
Installment loans provide you several months
or even years to repay your loan with fixed
monthly payments or installments, depending on
your loan provider.
|
|
Credit Check
|
A payday loan lender won’t check your credit
report, making them super easy to access.
|
An installment loan lender can run a soft
credit check which doesn’t hurt your score to
check your creditworthiness.
|
How To Choose The Right Loan For You?
Selecting the right loan for yourself can be tricky. But if
you know what type of loan you need,
secured or unsecured, and whether you have the ability to repay, things could
get a little easier.
Your credit score could also help you decide which loan to
choose between installment and payday. It's generally
believed that a payday loan is a better option if you have a
low or no credit score. Fortunately, some lenders provide
bad credit installment loans too.
In addition, if you're looking for improvement in your
credit, it's important to note that payday lenders typically
do not report your on-time payments to credit unions.
However, they do report if you fail to make payments. On the
other hand, installment loans can offer you the opportunity
to build credit if you make on-time payments over time.
Your loan requirement is also crucial. You can get more cash
and even more time to repay with installment loans than
payday loans. Also, the high APRs attached to payday loans
make them more expensive and comparatively hard to pay back.
Having all that said, choosing between installment and
payday loans perhaps depends on your financial situation and
how you want to manage it.
What To Expect From CASH 1's Installment Loans?
CASH 1 offers secured and unsecured installment loan options
to help you get the cash you need quickly. With our
online installment loan, you stand a chance to borrow funds even with a bad credit
score.
If you decide to get an installment loan, you can enjoy the
benefit of our flexible repayment plans that can help you
lower payments by spreading them out over more extended
periods. Prepayment penalties are also not a problem if you
repay the loan in full before time.