Loans

The Difference Between Installment Loans and Payday Loans

One of the biggest hurdles when shopping for a personal loan is knowing which type to choose. There’s several different kinds of loans, all with their own specific interest rates, terms, and conditions. The type of loan you need will vary depending on what you need it for, how much money you need, and the amount of interest you can afford to pay back. This is why it’s so important to do your homework when you’re shopping for a loan. 

Two of the most common types of personal loans for borrowers in need are personal installment loans, and payday loans. If you’re in need of some quick cash and you’re considering these types of personal loans, it’s crucial to understand the differences between them, so you can make the best choice for your specific financial situation.  

How Much Can You Get?

A payday loan is a common short-term, unsecured loan. You’ve probably seen them advertised online, or on a big neon sign as you drive down the highway. They’re designed for borrowers who need a little extra cash in order to make it to their next payday, hence the name. 

This means that usually, payday loans are for very small amounts. While any loan amount will depend on the lender, the borrower’s credit, and the state where the borrower resides, most payday loans are only for a few hundred dollars. 

So how do personal installment loans work? They tend to be for higher amounts than that of payday loans. They’re structured differently than payday loans in terms of repayment, interest rates, and other conditions. Usually, personal installment loans can range from several hundred dollars, up to several thousand dollars. 

How Much Do They Cost?

Interest rates are another area where these two types of loans differ. Because payday loans are typically used for emergency financing, and the borrowers tend to have lower credit scores, the interest rates can be high. Many payday loan borrowers aren’t able to get a loan from a bank or credit union, and some aren’t even able to get approved for a credit card. This is because having a poor credit history tells lenders that you may not be able to repay your debts on time. This is why it’s so important to work on improving your credit score if it’s low. 

Interest rates for personal installment loans tend to be lower than payday loans. This may be because many personal installment lenders review more of the borrower’s credit history than payday lenders. If the borrower is vetted more thoroughly, the lender can be confident that they’re likely to make back their money. 

How Long Do They Last?

Since payday loans are used by borrowers to stretch their money to their next payday, the loan term is typically only a couple of weeks. This can also make them difficult to repay. Many payday loan borrowers pay back the loan on their next payday, but after the interest they don’t have enough money to last to their next one. This can lead to the borrower using another payday loan. It’s important to make sure that you’re able to pay off a payday loan if you’re considering taking one out. 

Installment loans are definitely more beneficial than payday loans in terms of the repayment period. These loans are paid back monthly, over a longer period of time. Depending on the loan and the lender, some installment loans are even repaid over the course of a couple years. The longer amount of time to repay the loan can mean more manageable monthly payments. This may allow the borrower to make their monthly payments while also keeping up with their regular monthly bills and financial responsibilities. 

Why Choose CreditNinja?

CreditNinja is a premier lender for online personal installment loans. No more waiting in line and filling out a ton of paperwork. With CreditNinja, you can fill out a simple application, get a decision, get funded, and make payments all from the comfort of your home. CreditNinja makes the loan application process quicker and easier than ever before. 

If you’re in need of a quick personal installment loan, check out CreditNinja.com and apply today! There are never any hidden fees or confusing terms and conditions. With CreditNinja, what you see is what you get. And our talented customer support team is here to help you every step of the way. CreditNinja is here to help you get your finances back on track. Apply today!