When unexpected bills come along or you find yourself temporarily out of work due to illness, the bills don’t stop piling up in your mailbox. You have to find a way to make ends meet and put food on the table for your family regardless of the circumstances. During these hard times, most people start thinking about payday or installment loans. In order to decide which type of loan is best for your situation, you need to understand the differences between each loan opportunity.

Repayment Terms

Payday loans are short-term loans that you must repay in full from your next paycheck. If you don’t have all of the money plus interest on that date, then you must take out an additional payday loan that adds to your fees. Installment loans allow you more time to repay the loan, so you make payments over time rather than paying the full amount back at once.

Installment loans can have different payment structures and are often customized to the needs of the borrower. If you discuss your ability to repay the loan, some lenders will work with you to create a payment schedule that fits your needs. That flexibility is not typically offered with payday loans.

Borrowing Limits

The amount of money you need to borrow may determine whether a lender will approve you for a payday or installment loan. If you need a small amount of fast cash and can definitely repay the loan from your next paycheck, then a payday loan makes the most sense. If you want to borrow a more substantial amount of money and need more time for repayment, then an installment loan is your best option.

What about Collateral?

It is important to note that installment loans are not the same thing as title loans. You should not have to provide collateral when you secure an installment loan. Those loans are available if you have valuables that may help you secure a higher-dollar loan, but you can take out an installment or payday loan without any collateral.

Which Loan Is Best for You?

Before deciding what type of loan is best for your needs, read the terms of service for each option through your chosen lender. Think honestly about your ability to repay the loan, the amount you need to borrow, and what you will do with the money. If you believe you need more time than one pay period, then an installment loan is probably a better option.

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