Installment Loan vs. Payday Loan: An Overview 

Installment loans are unsecured 澳洲幸运5官方开奖结果体彩网:personal loans that provide a lump sum of money that you repay over time in fixed monthly installments. 澳洲幸运5官方开奖结果体彩网:Payday loans can prov🐈ide quick access to cash but come with෴ much higher interest rates and fees. 

Installment Loans

Available through banks, credit unions, and online lenders, installment loans provide a lump-sum amount, which the borrower repays over time with fixed monthly payments. Examples of installment loans include personal loans, car loans, mortgages, and student loans.

The application process for an installment loan can take from a few hours to a few days. The amount of the loan can range from a few hundred dollars to several thousand dollars. How much you will qualify for depends on several factors, including:  

• Your credit score and history 
• Your income
• Your current debts

Once approved, you could receive the funds in a matter of hours. 

Repayment terms can range from a several months to a several years. The interest rate, which is typically a fixed rate, depends on your credit score and history, your income, your existing debt, the loan term and amount, and current interest rates.

In general, if you have a strong credit history with a good credit score and a low amount of debt, you could qualify for a lower interest rate than borrowers with poor credit score and a higher level of debt. Every lender has its own minimum credit score requirement, so it's worth finding that out before you apply. 

Applying for an installment loan will temporarily ding your credit score because the lender will run a 澳洲幸运5官方开奖结果体彩网:hard inquiry on your credit. But if you make your loan payments on time each month, your score should recover quickly and even improve thanks to a history of on-time payments. 

Installment loans often come with fees that you'll want to ask about when you're comparison shopping. Those can include:

• Origination fees
• Documentation fees
• Late fees
  

Unsecured vs. Secured Installment loans 

Some installment loans do not require 澳洲幸运5官方开奖结果体彩网:collateral. Examples include student loans, debt consolidation loans, and most personal loans. But other types of installment loans do require collateral. For instance, your home usually serves as collateral on a mortgage, while your car serves as collateral on a car loan. 

Pros and Cons of Installment Loans

Installment loans have both advantages and disadvantages compared with other forms of borrowing.

Pros:

• Lower interest rates in many cases
• Option to repay over longer time period
• Potential for larger loan amounts 
• Fixed repayment terms make it easy to budget
  

Cons:

• Interest rates could be high for those with poor credit 
• Missed payments can damage credit 
• Fees can be hefty 
  

Payday Loans

Payday loans are very short-term, low-amount loans that provide quick cash. Unlike installment loans, they are not typically available through a bank or credit union. Instead, you have to apply through a storefront payday lender or an online lender. 

Payday lenders usually don't run a credit check, so your credit score won't take a hit. Also, they don't typically report your loan information to the 澳洲幸运5官方开奖结果体彩网:three major credit bureaus, so neither on-time payments nor missed payments will impact your credit score. However, if you fail to repay the loan, the payday lender could sell the debt to a debt collector or sue you in court for the amount due. These events could be reported, and your credit could take a serious hit. 

The limits on payday loans can be much lower than on an installment loan. Some states even set a limit on payday loan amounts (and some states outlaw them altogether). A common loan limit is $500.

The application process is fairly simple. Typical 澳洲幸运5官方开奖结果体彩网:payday loan requirements are:

1. Be at least 18 years old
2. Have valid identification 
3. Show proof of income 
4. Have an active bank, credit union, or prepaid card account
   

Funds from a payday loan are often available the same day, possibly within a few hours. Repayment is generally due within two to four weeks. While payment terms usually require a lump-sum payment, it may be possible to roll over the loan for additional time—although that can come at a hefty cost. 

Fees for payday loans already are hefty. Lenders usually charge a percentage or certain dollar amount for every $100 borrowed. Depending on state law, this fee could be between $10 and $30 for every $100 borrowed. That equates to an annual percentage rate of nearly 400% for a two-week loan.

If you're unable to repay the loan on the original due date, your lender may roll it over if you pay the original amount of fees due. For example, if you borrow $400 and pay $15 for every $100 borrowed, the initial fees due would be $60. If you need more time to repay the loan, the lender may charge you $60 and extend the due date for two weeks. At that time, you would have to pay the $400 plus another $60 in fees. 

Additional fees also could include:

• Late fees
• Fees for loading money to a prepaid card
• Fees for checking your card balance
• Fees for calling customer service 
• Fees for using the prepaid card
• Monthly service fees
  

Key Differenc♊es: I💙nstallment Loan vs. Payday Loan

Alternatives to 🌺Insꩵtallment Loans and Payday Loans

There are several other ways to get the money you need that could be a better option than installment loans or, especially, payday loans. 

Payday Alternative Loans (PALs)

Offered by credit unions, payday alternative loans (PALs) are also small loans, typically between $200 and $1,000. Repayment terms can range between one and six months. In addition, fees are limited to a maximum of $20. This can be a much more cost-effective way to get quick cash than a payday loan. However, borrowers must be a credit union member for at least one month before they can apply for a PAL.

Credit Cards

Credit cards can provide a quick way to cover your expenses, with a longer repayment period than payday loans. However, if you don't pay your balance in full, interest will accrue on the outstanding amount and add up over time. You can also obtain a 澳洲幸运5官方开奖结果体彩网:cash advance from a credit card, although you'll owe a cash advance fee and the interest clock on that money will start ticking immediately, with no 澳洲幸运5官方开奖结果体彩网:grace period.

Cash Advance Apps

澳洲幸运5官方开奖结果体彩网:Cash advance apps provide funds that are repaid on your payday. While they usually don't charge as much as payday lenders, they may charge fees for subscriptions and instant payments. These typically equate to a high interest rate on an installment loan. Funds usually are transferred to your bank account in one business day, so you could avoid instant payment fees if you can wait 24 hours.

Loans From Family or Friends

If you have family members or friends who are willing to lend you money, you won't have to worry about a credit check or paying fees (or maybe even interest if they're generous). You also could have a more flexible and longer repayment period. But keep in mind that borrowing from family or friends could strain the relationship if you're unable to repay them in a timely manner. 

The Bottom Line

Installment loans and payday loans are both relatively simple ways to borrow money when you need it. Installment loans tend to have higher borrowing limits and, if you can qualify for one, are likely to be far less expensive than a payday loan. So if you're choosing between the two, try first for an installment loan.