What’s the Difference Between an Installment Loan or Payday Loan

Sometimes you need same-day cash and you can’t afford to wait for a paycheck or other source of income. Your heater may have broken down and you need to pay the repairman.  .Perhaps you don’t have enough money to pay rent.  In situations like this, you risk hurting your credit score if you miss a repayment. Or you want to take up a new business opportunity but don’t have the available cash flow to do so.  There are also times when you just don’t have any money.  We all know it’s hard to get a bank loan or even a line of credit from a finance company.

In all these cases, there are many different financing options available to you.  Any of these lending opportunities can help you to get the cash quickly. Two of the biggest of these options are payday and installment loans. It’s possible to find both payday and installment loans online and both types will give you a rapid cash injection that you can use however you see fit. But both these types of loans also come with a large APR and potential risk. So the question is: how do you go about choosing the right option for you so that you can get the greatest amount of cash at the smallest expense?

Compare Payday Loans vs Installment Loans

The first thing to consider is what the precise difference is between both forms of borrowing. compare the payoff terms each lending choice A payday loan is a loan that gives you money within minutes of filling out a simple online form. Often this will be easy going and even those with bad credit will often be able to find loans willing to lend them the money they need. The downside is that they come with a very high APR – as much as 400%! This is fine if you are paying back the total amount in a couple of weeks, in which case you will only expect to pay around $15. If you take longer, miss your repayment, or borrow more, then you’re looking at a very expensive loan that may not prove to be worth it for you.  Many of these financing differences are small but can add up to large amounts of interest over months and even years!.  This tool allows anyone to compare the top installment loan companies that lend in their state.  There’s also information about the loan amount and individual loan terms for each offer by state.

Direct lender installment loans are like payday loans as a borrower can get money with little paperwork. They have slightly lower APR (typically 50-60% APR) and involve a longer repayment schedule.  Many of these loan terms have many repayment installments agreed upfront. Most larger types of loans will use installments or regular recurring repayments. An ‘installment loan’ is often describing as like a payday loan but with installments. These are both direct loans in as much as you are interacting with the lenders.  There are a few other small differences but most important is that both loans are unsecured.  A borrower does not need to use their house or vehicle as collateral to get one of these loans.

Is a Direct Installment Loan Your Best Option?

So what is the right loan for you? That will depend on your unique circumstances, cash flow, and requirements. In most cases, the best type of loan will usually depend on the size and duration.  You take out a payday loan for a short duration until the next employer pay date.  Direct lender installment loans are simple and direct. But better suited to being paid over a longer duration.  This means you can borrow slightly more but it’s going to be difficult to get approval.  Another issue to consider is whether you’ll be approved for a direct lender installment loan. Unlike payday loans and other low-dollar loans, an installment lender will require a decent credit score. We touched on this issue a few months ago. You can view the blog article here: Can I get an installment loan with bad credit?

Any borrower must be prepared to pay the full amount off in multiple installments.  They’re going to need to make sure there’s enough available cash flow as it’s required. Try to arrange for your loan to come out in three installments, right after payday.   This would be like having three back-to-back direct payday loans!  As always, make sure to compare direct lender installment loans to get the very best rates online before making your choice.