When you are in need of extra money, there are many options to which you can turn. You can take out a personal loan, a car loan if you need a new vehicle, a mortgage to pay off your home and much more. Two of the chief types of loans available for consumers are installment loans and payday loans.
Also Read :
- How to Pay Off Your Loans Fast to expand your business
- Short term loans for tackling the unexpected financial setbacks
- Professional Writing Service
However, if you are considering one of these options, it’s important to become familiar with them and how they work. That way, you can ensure that you are getting the one that is most appropriate for your situation. Here are the differences between installment loans and payday loans.
What is an Installment Loan?
An installment loan is a loan that is unsecured and generally shorter in term for borrowers who need fast cash. Interest rates tend to be on the high side and repayment of the loan is done over a predetermined period until it is completely paid off.
Generally, this type of loan is paid off over time through installments, hence the name “installment loan.” Many different types of loans fall under the category of installment loans, including mortgages and car loans and you can use them to start your own business.
They also include unsecured loans, which are those that don’t include any collateral being put down on your end, such as your home or vehicle to ensure that the lender gets their money back in the event you are unable to pay it back. A mutual installment loan is very similar to a payday loan, but the interest rates are not quite as high and you have the ability to pay it back in different payments over a certain period of time.
There are certain advantages and disadvantages to getting installment loans. They include the following:
Advantages of Installment Loans
• Predictable Monthly Payments: You know the interest rate of your loan because you can pay it back in regular, predictable monthly installment payments. Generally, payments are scheduled at the time when you take out the loan, which means payments will always remain the same and you will know exactly how much is needed from your paycheck to pay it back.
Short term loans for tackling the unexpected financial setbacks
- Longer Loan Terms: Because installment loans require monthly payments, the term of the loan is also generally longer, which can benefit you in the long run.
- Fast and Easy: Installment loans offer the benefit of being fast and easy to acquire. When you take out this type of loan, you can usually have the money directly deposited into your bank account within two days after approval.
Disadvantages of Installment Loans
• High Interest Rates: Although the APR on installment loans is generally not as high as those included with payday loans, you can still expect them to be considerably high. You may also find yourself paying more than you would with a payday loan after you have made payments in full.
How to Pay Off Your Loans Fast to expand your business
- Missed Payment Penalties: If you miss a payment on an installment loan, it can bite you because you will be responsible for additional costs in the form of penalties.
- Secured by Personal Property: Certain types of installment loans require you to put up personal property as collateral. This is necessary in the event that you don’t pay back the loan to ensure that the lender gets its money back.
What is a Payday Loan?
Payday loans are offered by agencies throughout the country. Over the past few years, they have risen in popularity, resulting in the availability of more online payday loans than ever. They are the type of loan you take out when you need fast cash because you have not yet received your paycheck.
ACCOUNTING SOFTWARE IS Bound To Make An Impact In Your Business
Amounts are generally lower, ranging from around $100 to $500. There is no collateral included, but interest rates and fees are typically high. A payday loan must be paid back with your next paycheck.
Payday loans come with both advantages and disadvantages. These are as follow:
Advantages of Payday Loans
• Easy to Obtain: Due to the wide availability of payday loans, they are extremely easy to get as long as you have a steady job with a steady income.
- Very Fast: Approval is very fast when you apply for a payday loan. You can receive the money almost immediately.
- Highly Convenient: Payday loan agencies are widespread, making it convenient to find them when you need a quick loan.
- Extra Option: Payday loans offer you an extra option if you are not the best candidate for a loan from a bank. This is because the terms of a payday loan are generally quite lenient.
5 Ways To Advertise Your Business Online
Disadvantages of Payday Loans
• More Expensive: Interest rates and fees on payday loans are among the highest, making them more expensive.
- Scam Lenders: Unfortunately, there are many scam lenders who offer payday loans. Always ensure that you are dealing with a reputable agency when looking to take out a loan.
- Can Become Cyclical: You can easily fall into a cycle of debt if you don’t immediately pay back a payday loan when you receive your next paycheck. Be careful and pay it back quickly to avoid this problem.
When you decide that you need a loan, it’s important to do your research. Make sure you know all the terms of these two types of loans before settling on one so you know you’re choosing the one that’s best for your needs.
Comments are closed.