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This is a payday loan vs. installment loans post to describe the major difference between these two distinctively types of loans.
Most tend to confuse both terms which may lead to them applying for the wrong type of loan, thus incurring terms and conditions which they’re unable to keep up with, and today I’m going to show you exactly how to distinguish between them both.
Let’s get started!
When we need money it is easy for most of us to just consider calling our family or friends to loan us money, we always assume we can never be stranded; now imagine a global pandemic like the Covid-19 where everyone rich or middle class was affected without any prior warning and one is in desperate need of money but so is everyone, what then do you do?
You could use your credit card, get a loan from your bank, credit union, online lenders, or other financial institutions, but honestly, why would you want to go through that stress, compound so much debt when there is an easier, faster and cheaper way out. I mean if you have no credit or poor credit you may have limited options to choose from especially in emergency situations where you probably are in desperate need of cash.
If you are faced with this predicament you might want to consider an installment loan or a payday loan.
The best way to know which loan would be perfect for you in whatever situation would be to first learn their difference. But you don’t have to worry because that is what we are here for.
Having to choose between installment loans vs. payday loans is no easy task. There is so much to consider, but before we delve into that, let us have a quick overview of the main difference between them both.
An installment loan is a type of loan that is repayable with either fixed and or regular payments over a preordained period commonly known as the term.
Installment loans are basically a type of agreement or contract involving a loan that is paid back over time with a set time of scheduled payments. The term of the loan can range from as little as a few months to as long as 30 years.
A mortgage loan is a typical example of an installment loan. There are quite a number of financial institutions that offer installment loans including credit unions, banks, online lenders, etc.
Every installment and repayment timeline is pre-schedule beforehand, while the contract is still underway and the loan is finalized.
Generally, in comparison to payday loans, installment loans offer higher and larger amounts of money.
If you haven’t already heard of a payday loan then a simple answer to your question is – payday loans are other options for you if you’re interested in borrowing money for emergencies or whatever reason and have bad credit or don’t have good credit; they are basically short term loans.
They can have a term of 31 days and sometimes fewer. Typically in order to take out a payday loan, you would have to give the lender a postdated cheque, or electronic access to your bank account and agree with the lender that by the end of your loan term, the lender can either deposit the cheque or withdraw the money owed from your bank account.
Qualifying for a payday loan is one of the easiest things to do; a payday loan application may not require a credit check, however, it is not impossible for an application to get denied if the individual applying does not meet the requirements of the lender.
For example, a person would be turned down if he or she is below 18 years old, or, if such an individual does not have a stable source of income or a steady job, and if the income is too low for the amount he or she wishes to apply for. It would obviously also be unwise to grant a loan to one who has recently declared bankruptcy or even one who bounced a cheque.
However, beyond that, the requirements for a payday loan are almost nonexistent.
You may wonder just like I did if payday loans are the same thing as installment loans. If you did, then the answer is no; payday loans are not installment loans!
This is simply because payday loans, unlike installment loans are paid back to the lender in a single lump sum when the borrower gets paid.
Other times, payday loan payments may be divided across two repayments on two different paychecks, depending on the agreement.
However, installment loans are basically a type of agreement or contract involving a loan that is paid back over time with a set time of scheduled payments. The term of the loan can range from as little as a few months to as long as 30 years. Therefore they are paid back in installments.
But, did you know – there is such a thing as payday installment loans?
Unlike the traditional personal payday loans that we are so used to already, that must without failure be paid back by the very next payday, the payday installment loan allows the borrower to repay the loan over a longer time period with interest and in installments on days that may coincide with their paydays.