We’ve all had our fair share of bad days where sometimes, we just can’t make ends meet. While it is always better to be prepared, you might not always have financial aid when a situation crashes on you unexpectedly. At times like these, it is best to be well informed about what decisions to make and where to borrow money, so you don’t end up in a cycle of debt or get scammed by the system. With various loans available on different terms, you can now avail yourself of any lending options according to what you’re looking for.
Both installment loans and payday loans help you in this process and save your day! However, they have different conditions and procedures in which they operate. While installment loans are an umbrella term and are usually used when you want to pay back over a more extended period, payday loans are used by lenders with same day funding have a way shorter payment period, and no credit is required. They also have high-interest rates and can be used to borrow money for an emergency and return it immediately quickly. So which one of these is better and why?
- Loan Amounts
Investment loans are long-term loans and require a credit check. Hence, with the proper documents to prove your credibility, you can avail yourself of a significant amount of money that you can pay back over the months. However, a payday loan requires no background check and gives you the money in hand. Hence only a limited amount of money can be availed by a payday loan. If you need a lot of money, it’s advisable to take up an installment loan.
- Repayment Periods
One of the key distinguishing factors between the two types of loans is repayment periods. A payday loan requires you to pay the money back within a few weeks, as soon as you obtain your paycheck. However, an investment loan allows you to plan out how much you want to pay back over time. Further, the entire amount has to be paid back in a payday loan, whereas an investment loan takes a set amount every month.
- Interest Rates
A payday loan has up to three-digit range interest rates. With such short notice and no background check involved, payday loans allow you to borrow money as long as you can ultimately afford to pay it back as soon as possible. However, an installment loan has lower interest rates, and you can afford to pay it back in an extended period. Further payday loans also combine other fees and add on interest rates and form an Annual Percentage Rate (APR) that can go up to 700%
- Process of Application
An installment loan requires a stable income source, a residence, and no pending unpaid loans to be eligible for the process. Once you can prove that you’re eligible and pay back the money, you can take a significant loan. A payday loan is more instant and can be used for a quick and emergency process without waiting for approval.
- Credit Check
Lenders offering installment loans will require a complete credit check before lending you the money. If your credit score is low, your loan will not be approved. However, it shouldn’t be a hassle to get an investment loan with the proper documents and proof, given the easy procedure. A payday loan is more accessible, and the requirements are lower than the installment loan.
The Sum Up
While installment loans are an excellent solution to take out money for long-term payments, their interest rates are higher than bank loans. With just a simple proof of credibility, you can obtain loans for covering significant expenses. Lenders with same day funding typically provide payday loans with huge interest rates that can put you in a mountain of debt. It is advisable to go for payday loans only if you require urgent money and are confident that you can pay it back. Otherwise, an installment loan would be a win-win situation where you get a high loan amount through an easy process and can also pay it back in small investments over time.