Online loans are quickly rising in popularity in the financial market. They are convenient because you can take them without leaving your house. They are also available for people with all credit scores. So far, the most popular ones are payday loans and installment loans. We know them, but do we know which one suits us best? What is the difference between a payday loan and an installment loan?
The main similarity is that you can get both payday and installment loans with a bad credit score. Direct lenders of these cash advances do not check your credit score. They focus on your source of income. It proves your ability to repay on time, which is enough for the providers. Besides similarities, payday and installment loans have some differences too.
Firstly, there is the amount of money you can borrow. Usually, if you need between $100 and $1,000 in loans, a payday loan can help you. When you need larger sums, such as from $1,000 to $5,000, installment loans are more suitable.
Secondly, the repayment terms differ. Both are considered to be short-term cash advances. However, you repay payday loans faster. You give back the entire sum on your next payday. It is between 2 and 31 days. When it comes to installment loans, you repay them in up to 24 months. You pay off in equal monthly or weekly installments until you repay the entire sum.
Thirdly, payday loans usually have a higher interest rate. It is because the repayment term is shorter. The costs may vary from state to state, as the authorities regulate them. Nonetheless, it would be best if you were careful with the repayment period so that you don’t end up paying extra fees.
Before you choose a loan, make sure you know your financial needs and take into consideration these 3 Important Things To Think About When Borrowing! If you need more help, contact a lending expert to answer your questions. Inform yourself and borrow safely!