Payday Loans vs. Installment Loans: Which is Better?

By Friday, August 11, 2017 0 No tags Permalink

When consumers with bad credit and few options find themselves in the midst of a financial nightmare, they wonder how they can go about making things work. It’s not uncommon to wonder how to make ends meet when it feels the financial world is falling apart, but there is always a way. Many assume their only financial option is a payday loan. A payday loan is a loan from a payday lender who charges outrageous interest rates designed to make it almost unaffordable to ensure anyone can pay back a loan of this nature. It’s not a loan anyone wants to take out, but many people find they have no other option when it’s time to take out a loan.

The good news is there is another option. An installment loan is a much wiser, much more financially savvy option for anyone who wants to borrow money for the short term without worrying how they will pay it back. When faced with the option between an installment loan and a payday loan, it’s quick installment loans you want to choose.

How does an installment loan work?

An installment loan is simple. It’s the kind of loan you borrow and get to pay back over time. Unlike a traditional loan, you won’t have years to pay it back. You’ll have a few months up to a year to pay back what you borrow either biweekly or monthly. Depending on your credit score, your payments might vary a bit because of a higher or lower rate. However, the rate is always lower than that of a payday loan, which makes this kind of loan much simpler to repay.

How is it better than a payday loan?

As previously discussed, payday loans are more expensive and they must be paid back in full right away. Most payday loans must be repaid in full on the next date of payment consumers receive. It typically means people are back where they began taking out another loan to afford to pay back the one they just took out. It’s a vicious cycle that takes people months to figure out. An installment loan allows you to begin making small payments when they are due, which means you get to make them more affordably.

An installment loan doesn’t require you come up with a large sum of money a week or two after borrowing the money to make ends meet. It’s more affordable, it’s cheaper, and it’s going to give you more options in the future. If you’re stuck trying to figure out how to make your financial situation a little less stressful, considering taking out an installment loan before you go the route of a payday loan.

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