How Is Installment Loans Different From Payday Loans?

By | June 23, 2020

Finance is something most people have difficulties with.  There can be times when you run into trouble and require a loan; however, there are many different types of loans available.  Two of the most popular are payday and installment loans.  However, you can find it very difficult to know which loan is best for you, so what type of loan should you choose?

  • What Type Of Loan Do You Need?
  • Do You Want A Short Or Long Term Loan?
  • Do You Want To Build Credit?

A Payday Loan

A payday loan is simply a short term loan – at least it’s designed to be a short term loan.  This is when you can borrow a certain amount, usually a small amount, and pay the money back on your next pay day.  The length of time in which the loan usually lasts for is anywhere between five days to three weeks.  More often than not, the entire loan amount should be paid within a month or thirty days.

However, there is a huge amount of interest in which you have to pay along with the loan amount.  The loans can in fact run longer if you fail to pay back the amount within the thirty day period which adds more interest. Check out this site:

Installment Loans

With installment loans, you take the loan out for a lengthier period of time.  Usually you take the loan for more than three years, and this can be anything from a vehicle loan to a mortgage for your home.  The amount in which you repay can vary as well; depending on the amount of money you choose to borrow but the payments can be low and affordable.

The time in which you can repay the loan can be over a course of ten years or so, and the payments can be low so that you can repay the loan.  This also allows you to build your credit.  Banking a good form of credit can be possible when you choose installment loans.

The Actual Differences Between Payday and Installment Loans

Both payday and installment loans can be great, however, there are differences.  The first being the length of time in which you take the loan out for; with installment loans you can take this over a period of years.  However, with payday, they are short term loans and they have a huge amount of interest that you have to pay back.  With installment, you still need to pay interest however you don’t pay as much.

Installment loans can offer you the ability to build and establish credit.  Payday loans don’t always offer a huge amount of credit which isn’t good if you are looking for a loan to specifically help you to build credit.  With the installment loans, you can build a good record of credit and history of repayment which is great.  Though you must ensure you keep the repayments up at the same time and not miss any. More details!

Payday loans can be good for short term loans, however, for long term, installment loans are a great option.