Installment and Payday Loans Comparison

Since fast and easy to get payday loans are restricted by the recent rules and regulations, the lenders are shifting into the other lending industry specializations. Trying to get the significant benefits, but being unable to receive the high-interest rates, they turn their attention into the installment lending market.

These short-time, urgent and emergency credits are similar in terms of the debt liabilities the borrowers undertake, being often unable to repay them in time. However, these loans have some differences and particularities.

Payday Loans Basics

Payday loans are commonly short-time credits for the amounts of about $100-$1,000 that are to be repaid within a month with the quite high interest rate. The distinctive features of these loans are:

Due to the high interest rates, payday loans are forbidden or limited in multiple US states. Thus, the lenders switch to the other activities or territories and the potential debtors are to look for the other emergency opportunities.

What are Installment Loans?

One of the suitable alternatives is an installment credit that is very similar to a payday loan, but still completely legal. Installment loans are provided for the longer periods and for the larger amounts. They are offered by most official banks, credit unions and standalone lenders. These short-time credits are notable for:

Installment loans can’t be repaid earlier unless the borrower paid the full interest. Thus, these short-time credits are not more beneficial than payday loans.

The Key Loan Types Differences

Payday loans are great for the borrowers who:

Alternatively, installment loans are preferable for the borrowers who need larger amounts, have some property to secure the credit and have better credit scores.

Thus, both types of loans are notable for high-interest rates. However, payday loans are commonly taken for 7-30 days for emergency needs, and being repaid in time, have no bad consequences for the creditors. Additionally, interest rates differ depending on the state and local regulations.

Meanwhile, installment loans are taken for longer periods with pretty high interest rates, also. Additionally, the borrowers risk losing their property in case of non-repayment. However, interest depends on the borrower’s credit history and score, so it may be not too high, actually.

So, before applying to credit unions, online lenders or check-cashing stores, try to protect your finances and think about the loan necessity, terms and look for the best credit conditions.

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