In 2018, US non-revolving consumer debt reached nearly $3 trillion. Non-revolving debt is almost entirely made up of loans.
It is clear that many of us are making use of loans. With interest rates having stayed relatively low for the last few years, it is not difficult to see why.
If you’re thinking about taking out a loan, you have a wide range of options available to you. But which type of loan should you choose?
Read on as we compare two popular types of loans and look at the differences between an installment loan vs payday loan.
What Is an Installment Loan?
An installment loan is probably what most people think of when talking about loans.
It is a loan fixed for a set period of time, and the repayments are a series of regular installments. The amount of the loan, the length of the loan, and the size of the repayment installments are all fixed at the time the loan is taken out.
What Is a Payday Loan?
A payday loan is a short term loan that is usually repaid in one lump sum.
The loan is usually secured against the borrower’s next paycheck. Once payday arrives, the expectation is that they will pay off the full amount of the loan plus interest. There is only one repayment made with a payday loan.
Differences Between an Installment Loan vs Payday Loan
The most obvious difference is that an installment loan is repaid back a little at a time, rather than in one lump sum.
But there are other differences too. Payday loans tend to be for amounts of a couple of thousand dollars or less. Installment loans can be for hundreds of thousands of dollars, depending on your status.
The interest rates on payday loans are also much, much higher. This is because they are paid back over a short period, so the lender wants to earn as much interest as they can in that time.
Benefits of an Installment Loan
Installment loans give you peace of mind by offering regular repayments that should be within your means.
They can also be used to borrow much larger sums of money. And since they are over longer terms, the interest rates will usually be far lower than with payday loans.
They are also relatively easy to refinance if necessary.
Benefits of a Payday Loan
Payday loans are very easy to obtain. As long as you have a paying job you should be able to borrow money with a payday loan.
They are also very fast; you can usually get your loan approved and receive your cash within minutes. And they are also easy to find; there are a large number of payday lenders both online and in most towns and cities.
Are You Looking For a Loan?
Now you know the difference between an installment loan vs payday loan, you may be looking to take one of them out.
In which case, we’re here to help. We can offer both installment loans and payday loans, so we’ve got you covered whatever option you decide to take. We also offer a wide range of other loans, including loans for people with bad credit.
Submit your loan request today.
Here are some other articles you might enjoy:
How is the Interest on a Payday Loan Calculated? A Guide for Borrowers
Business Financing 101- The Best Places To Get a Business Startup Loan