You’ve been hit with an unexpected expense. Your paycheck is delayed, and you don’t have enough in your checking account to pay your bills.
You just feel like taking out a loan would help you to get things back in order. The only problem is, you’re not certain what type of loan you should apply for.
This post is here to help.
What’s an installment loan, and is it a good fit for you?
If it’s not, would a personal payday loan be a better option for your financial needs?
We’ll answer all of these questions and more below. Read on to learn how you can make the right choices when it comes to borrowing.
What Are Personal Payday Loans?
First of all, let’s make sure that you understand what a personal payday loan is.
In a nutshell, payday loans are short-term loans under the amount of $1000. They exist in order to provide you with a “safety net” as you wait for your next paycheck to come in.
If you live paycheck to paycheck, think of payday loans as a pay advance that comes from a lender as opposed to your employer.
That said, you should never borrow more than you need or more than you’re able to pay back on time.
They typically have high interest rates, and may have specific lending fees attached to them, as well.
They’re especially popular because they have a simple — and fast — application process. In most cases, a lender won’t even require you to complete a credit check. As a result, they’re also a popular lending option for those who have less-than-perfect credit scores.
Who Should Apply for a Payday Loan?
In most cases, there are a few hard-and-fast rules to keep in mind when considering whether or not a payday loan is best for your financial needs.
First, remember that payday loans have shorter repayment periods than other types of loans. This means that you’ll need to be able to repay your loan, in its entirety, fairly quickly. (This is why payday loans are often given in smaller amounts.)
Additionally, remember that you need to be able to handle the high interest rates of payday loans. This is why, the sooner you can pay them off, the better.
Remember that payday loans typically shouldn’t be used to foot any sort of bill other than an emergency. They’re also not usually meant to fund larger purchases.
Things like groceries, keeping your electricity on, ensuring you can make your car payment, and handling emergency expenses are good reasons to take out a payday loan.
Taking yourself on a vacation, going on a shopping spree, or using the money to fund a business are not.
In some cases, you may want to use a payday loan to help you to rebuild your credit score. You can give it a boost by applying/being accepted for the loan, then following the loan terms to the letter.
What’s an Installment Loan?
Now, let’s define personal installment loans.
These are personal loans that you can use for any purpose. In other words, you don’t need to provide a lender with a business plan or even discuss how you plan to use the money during the application process.
You’ll be able to get a higher loan amount with a personal installment loan than with a traditional payday loan. In most cases, you can ask for loan amounts from $500 to $5,000.
This makes them an excellent alternative to taking on additional credit card debt, as well.
As with payday loans, you likely won’t need to complete a credit check in order to be approved. They also carry a longer repayment period than payday loans do.
You’ll have a period of several months to repay the loan in full. Usually, these payments will take place in the form of an automatic withdrawal from your bank account.
Still, just because you have more time to pay it off, doesn’t mean that you should bite off more than you can chew.
For best results, limit the amount you borrow to about 10-20% of your income.
Who Should Get Installment Loans?
So, what kinds of situations would benefit from an installment loan?
If you need a longer repayment period, and if you need a larger amount of money up front, this might be a better fit than a payday loan.
The same thing goes if you have the time to compare multiple loan offers from different lenders. This will help you to ensure that you get a good interest rate. You should always take the time to read up on any repayment penalties.
Also, be sure to speak with your lender about any fees attached to your loan. You want to ensure that they don’t actually end up negating the purpose of you borrowing the money.
Installment loans are a helpful solution for those who have longer-term financial needs, not just the relief a single payday loan can provide.
Need Help Applying for a Loan?
Now that you can answer the question, “What’s an installment loan?” it’s time to start thinking about your application process.
Whether you opt for a payday loan or a personal installment loan, we want to ensure you get the best possible option for your need.
Learn more about which loan is right for you — and how to strengthen your current financial situation — with our help.
Getting out of debt or getting the money you need as soon as possible doesn’t have to feel impossible.
Submit your loan request with us today.
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