The main differences between a payday loan and an installment loan are that installment loans tend to offer more money, more flexible repayment options, and lower interest rates. A payday loan is generally repaid in one lump-sum payment after about two weeks, whereas installment loans allow borrowers several months or even a couple of years to repay the principal and interest.
When you’re in an emergency financial situation you may not feel like you have the time to figure out all the different quick cash options and how they work. But spending some extra time researching before signing for that loan could save you a lot of time and money in the long run.
A payday loan is a short-term, fast-cash option that allows the borrower to get a small amount of cash and repay it on their next payday, or within about two weeks. It’s an unsecured loan, meaning you won’t have to provide any collateral. Payday loans tend to carry higher interest rates than other options, which can make them difficult to repay on time since the repayment period is quite short.
Payday loans are usually used for cash emergencies like paying rent or bills when your paycheck isn’t enough. But since it’s usually a small amount of cash it won’t typically solve all of your financial problems, and many borrowers end up using them many times in a row.
A personal installment loan, on the other hand, tends to offer borrowers more money, longer repayment periods, and lower interest rates overall. It’s also an unsecured loan, and much like payday loans, it is used for emergency expenses like medical bills, car repairs, etc. When it comes to choosing between these two options, the choice should be clear.
While you should research any loan or lender you’re considering, you’re more likely to get a safer loan by using a personal installment loan. The higher loan amounts, longer and more flexible repayment options, and lower interest rates make these loans the preferred option in an emergency situation.