INSTALLMENT LOANS VS. PAYDAY LOANS 

» Posted by on Jul 31, 2018 in  Loan Installment | 0 comments

Installment loans and payday loans are what they call small-dollar, high-cost loans. They usually carry high interest. Borrowers are typically low in income or having a poor credit or having a little credit history. Subprime borrowers might not have access to other forms of cheaper consumer credit like credit cards or home equity loans through credit unions or banks. 

 

If you need extra cash, getting a loan might be overwhelming at first but after thinking of the amount that you need and how soon you will need it, you might want to check your credit score and break down your available option. if you are needing a large amount of money in a little amount of time and a bad credit score, this narrows down your option to loan installment utah or a payday loan.  Read more to able to understand what the difference between these two types of loan is, and what is the best for you. 

Installment loan 

Loan amount ranges from $150 up to several thousand dollars, principal amount, interest and other finance charges are being paid in fixed monthly installments and ranges from six months to a few years. This type of loan could be renewed in a few months with new interest, fees and credit insurance. The loan amount usually resets to its original amount borrowed or increased. An installment loan is typically secured by a property excluding real estate. Collateral may include consumer electronics, cars, power tools, jewelry, and firearms.  

Payday  

Payday loan usually ranges from a hundred dollars to $1500. This type of loan is short term and must be paid in full within 30 days or less. It’s commonly due immediately after the receipt of the borrower’s paycheck. It is repaid through post-dated check which the borrower provide after the loan has been made or it can be an automatic withdrawal electronically after the paycheck has been deposited directly in their bank account. Lender charges fee for the loan and can be calculated as annual percentage rate. A typical payday loan goes like when your principal amount is $100 that will due in two weeks with a fee of $15. The loan would carry an annual percentage rate of 390%. 

The loan is typically unsecured that the lender only asses the borrower’s capacity in paying the loan based on the condition of the previous paychecks. The loan is often rolled over in full upon due and if the borrower can’t pay the amount, the borrower will pay for additional fees and still owes the original loan amount for another month.   

Here are some things to consider in choosing whether a payday loan or an installment loan to determine which one do you really can handle: 

If you need only a small amount quick, a small expense you may consider payday loan but id the amount is too much to pay for a single payment, go with an installment loan. Credit rating doesn’t matter in installment and payday loans when borrowing but if you fail to pay on time with these two types of loan, this will reflect on your credit score negatively. Payday loan may not necessarily affect your credit score but an installment loan, paying on time can help provide a positive feedback on your credit score.   

The type of loan you need depends on what will work for you. Take time to check your financial situation before making a decision. 

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