Payday Loans vs. Installment Loans – Pros and Cons of Each

If you need money, there are many different places to borrow it. From loans in installments to payday loans, there are a wide variety of options. Many people consider getting a payday loan or a loan in an installment at some point in their lives. Here’s an explanation of each.

Pros and Cons of Getting a Payday Loan

These loans are exactly what they sound like. A loan to get you through to your next payday. They are easily available, as long as you have income coming in, and some don’t even check your credit. These loans are meant to be fast and easy.

Pros of Getting a Payday Loan

  • These loans are readily available. While not available in all states, these loans are often available within 24 hours of your application.

  • A loan such as this can cover a large amount of money which is helpful in an emergency. Most loan locations will cover up to $1,000.

  • These loans will base what they lend you out of your paycheck.

  • These loans are available to people with bad credit and no credit. Many places for these loans do not do credit checks and instead, rely on proof of your income.

  • You can apply for these loans online.

One of the easiest ways to apply for these loans is online. You can also apply for one of these loans in many in-person stores.

Cons of Getting a Payday Loan

  • They can be expensive to pay back if you miss a payment. Look at the date you’ll be required to pay back the loan. You’ll want to make sure you can pay the loan back at the next check. Make sure to note the interest rate.

  • These loans are not available in all states. Several states have banned these loans. Make sure that they are legal in your state.

Pros of Getting an Installment Loan

  • This type of loan can be large. Some people use these loans to pay for their car; some people use these type of loans to pay for their house; others use them to pay for a vacation or an emergency expense such as a car repair.

  • These loans often have a lower interest rate over other loans. Some can be as low as 15% interest. As with any loan, read the terms and conditions before accepting the agreements. Make sure to keep a copy of the loan contract in your record.

  • They can be fixed-rate and you will have a schedule for paying them off. You can usually work with your installment loan direct lender to make sure this is something that you can easily afford to do. Do not be afraid to ask questions about the terms and conditions regarding the loan.

Cons of Getting an Installment Loan

  • Installment loans may need a credit check to complete. Some may not accept people with bad credit.

  • These loans will take time to pay back. Before taking out a loan, sit down with your budget and make sure it’s affordable to you, long-term. Can you add in the extra payment at every paycheck, or every month?

There are many great ways to borrow money if you need too. If you do your research, you will be able to get a great loan at a reasonable interest rate.

John Andrew is the Founder and Publisher of Teens Mean Business & has been writing about small businesses since 2005.

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