When you experience an unexpected situation and you need money quickly then there are a few options for you. These include installment loans and payday loans, as well as some other options such as credit cards and loans from friends or family. Sometimes some of these avenues are not available to everyone. If you have a certain credit score then they may not be available to you.
Payday loans are very different from Installment loans. In most cases, Installment loans are a much better choice than payday loans and this article will explore why this is. Read on to find out the difference between the two and which one is best for you.
What Is An Installment Loan?
An installment loan refers to most general loans. These can include personal loans or commercial loans. They are called installment loans because they are repaid with regular installments.
Installment Loans Pros And Cons
Installment loans are better than payday loans in lots of ways.
Pros
More Time And Flexibility
Installment loans give you the chance to have more time and flexibility when it comes to paying back the loan. With installment loans, you will have the opportunity to repay the loan over a period of weeks or months. This gives you a lot more flexibility over managing your money than a payday loan would.
Installment loans are very easy to apply for as you can apply on your mobile or computer. While installment loans do provide you with more flexibility, they should still be considered thoroughly before you take one out. This is the case for any loan.
Ability To Finance Large Purchases
Installment loans allow you to take out a loan that will help you when you are making big purchases. This can include things like car payments or medical expenses.
Save Interest Charges If You Pay Off The Loan Early
If you are able to pay off the loan early then it is usually possible to save yourself the interest charges. Check with your loan provider for more information on this.
Cons
High Loan Fees
Sometimes loan fees on installment loans can be very high. It is important to check this before you take the loan out and look around for the best deal that you can find.
Poor Credit
If you take out a loan and fail to make the payments on time then this can cause you to have a bad credit score. It is important before you take out a loan to ensure that you will be able to pay this loan back, otherwise you may end up damaging your credit score long term.
When Should You Consider An Installment Loan?
If you are in need of quick access to some money then an installment loan may be right for you. This can be because you have encountered an unexpected expense. For instance, medical expenses, rent expenses, car repairs or work on your home. If you are in a situation like this then an installment loan may be the best way to ensure that you don’t build up too much debt.
What Is A Payday Loan?
A payday loan is a way that you can borrow money short term. You will get a pay out with very high interest rates. The idea behind a payday loan is that it provides you with a portion of your next paycheck early. Payday loans are very dangerous loans to take out as you are required to pay them back very quickly and they have very high interest rates.
Are Payday Loans Variable Or Fixed?
Payday loans are designed to be paid off in one go very soon after you have taken them out. The interest rate on these loans are therefore fixed. You will likely be charged a certain amount of money per $100 that you borrow.
How Long Do Payday Loans Stay On Record?
Payday loans stay on the record by credit bureaus for between 6 and 10 years. If you don’t pay these back on time then your credit score will be affected, causing it to be harder to borrow money in the future. This is only the case if you are not able to make the payments.
Can Payday Loans Be Written Off?
It is very rare for a payday loan to be written off. This is because there is a lot of money for the lenders to make on the high interest charges. For this reason it is very important that you pay off these loans as soon as you can. If you can’t pay this back then you may end up having a collection agency pursuing you for the money. This is a very stressful experience and it will damage your credit score.
Are Installment Loans Variable Or Fixed?
Installment loans are often variable rate loans. This means that the interest fee will go up depending on how long you take to pay back the loan. If you pay the loan back quickly then it is likely that the interest rates will be very low.
Other Options
There are lots of other options if you need some money quickly. You could take out a credit card. In lots of cases this can be a very good option as there are set interest rates on credit cards. If you don’t have a credit card, then you could consider taking a loan from a family member or friend. This is very likely to cost you a lot less money than a loan will.
Can You Get A Payday Loan If You Don’t Have A Bank Account?
You do not need a bank account to borrow money. Lenders that don’t require a bank account to give you a loan are much more likely to have very high interest rates. Payday lenders might ask for a bank account in some cases, but not in all cases. They can be very hard to repay, though, so it is important that you try to avoid them where you can.
How To Get A Payday Loan?
Payday loans are very easy to get. Some allow you to apply online or on your mobile, while some need you to go into a physical store in order to offer you a loan. You will need to give proof of income and some other documents in order to take out a payday loan. Sometimes you will be required to upload information online to a site to prove your identity and that you have the funds to pay back the loan.
Payday Loan Vs Installment Loans
If you don’t have any other option, then an installment loan is definitely the better option over a payday loan. This is because payday loans often require very high interest rates and very short payback times. Installment loans give you more time to make your payments.
Final Thoughts
As payday loans have a much shorter repayment time and very high interest rates, they are a last resort. It is much better to get an installment loan in place of a payday loan. These loans allow for much more flexibility and lower interest rates.