Installment Loans vs Payday Loans
Installment loans and payday loans are two of the most common and popular types of short term loans. One of the reasons why they are popular is because neither of them requires a traditional credit check*. So, if your credit score is not ideal and you need some quick cash, you can opt for either an installment loan or a payday loan. Another advantage is that they are easy to get. You may even apply online, and the money will be credited to your account by the next business day. Apart from these similarities, they are both different in their own ways.
Payday loans are short term loans that you can take against your next paycheck. In order to be eligible for the loan, you have to be at least 18-years of age, have a regular source of income, and a bank account. The loan amount that you can take range anywhere between $100 and $1000. If all the necessary documents are submitted, a lender can approve a payday loan in a matter of minutes. You can either collect it in cash or have it credited to your account. The duration of a payday loan is only until you receive your next paycheck. Once you receive your paycheck, the loan amount has to be paid in full to the lender. This is the main difference between a payday loan and an installment loan, the payday loan has to be paid in full in a month, the installment loan can be paid in installments over an extended period of time.
The fees and interest rate of a payday loan are usually high. However, it is ideal for people who need some cash immediately, as well as for those whose credit score is bad. If you have a medical emergency, a payday loan can really come in handy. Finding a lender who provides payday loans online is pretty easy nowadays, Also, there are a number of payday loan agencies located throughout the major cities in the country.
An installment loan is also a short term loan, however, unlike a payday loan, it can be paid back in installments over a predetermined period of time. Installment loans also have relatively high interest rates, but not as high as payday loans. The loan amount that you can take ranges between $200 and $2000. Some lenders may provide you a higher amount as well.
You can apply for installment loans the same way you apply for payday loans. You will be required to submit documents that show that you are 18 years of age or higher, copy of your payslips, and your checking bank account information. The interest rate is fixed, so you know how much you will have to pay each month. You can opt for an installment loan if you need cash quickly and you know that you will not be able to pay it all back in one lump sum amount in just one month. Installment loan payments consist of two parts, interest and principal. More of the payment goes to interest at the beginning of the loan and more goes towards principal toward the end of the loan.
Now, both payday loans and installment loans do not require a traditional credit check*, however, if you fail to make the payments on time, it will be reported to the credit bureaus. This will hurt your credit score. You can choose between an installment loan and a payday loan by asking yourself how much money you need, how long you need it, and how you will pay it back.
*Traditional Credit Check - meaning from one of the main 3 bureaus.