The Difference Between Payday Loans and Installment Loans
Modern consumers are working harder than ever. Despite responsible money management, sometimes expenses come up that necessitate a loan or short-term financing. Borrowers have numerous financial products at their disposal and knowing what product to choose could save a great deal of interest and fee charges.
With so many different types of loans available, consumers often confuse various products. One of the most common pitfalls is borrowers’ lack of knowledge on the differences between payday loans and installment loans.
A payday loan is a short-term loan that is designed to be taken out for a very short time frame, typically 14 to 30 days. The borrower must provide several pieces of information, and must be employed. This type of loan involves the borrower receiving an advance against their next paycheck. The borrower will typically sign a post-dated check or agree to an automatic bank withdrawal on their next payday. These types of loans are paid back in full in a lump-sum payment and often carry extremely high rates of interest and fees. No credit check is required.
An installment loan, on the other hand, is a loan made by a bank, credit union or private lender. These loans are available with or without a credit check, although borrowers with string credit will pay lower interest rates. As the name implies, an installment loan is paid back over a longer period of time, typically 12 to 36 months, and the loan is repaid in equal monthly installments. Interest rates and fees are typically significantly lower compared to a payday loan and an installment loan can even help the borrower establish or build a positive credit history.
Where are Installment Loans Available?
Installment loans are available from various banks, credit unions, financial institutions, private lenders and peer-to-peer lenders. Companies like liftcredit.com offer installment loans online and feature a simple and convenient application process. These companies can help make financing affordable to borrowers with or without a good credit history and offer same-day approvals. With no credit check required, you can have the funds you need in a day or two with the peace of mind that comes with knowing your monthly payment amount.
What can Installment Loans be Used for?
An installment loan can be used for anything. Some common reasons to use an installment loan include emergency home or auto repairs, large medical expenses, credit consolidation and more.