Are payday loans better than installment loans for a cash-strapped borrower?
Suppose you’ve just crossed half the month and you’re running out of funds to make ends meet throughout the rest of the month! What are you supposed to do? You might even be hit by some unforeseen bill or some sudden medical expense. Where would you get funds to meet such unavoidable and unpredicted expenses? Don’t you think you would probably need to seek help of some lending institution who could lend you an amount that could bridge the temporary gap?
Payday loans vs. installment loans
A payday loan is conducted by some loan agency and most of them are located around various parts of the cities. In fact, the market has seen a soaring number of companies lending fast cash loans or cash advance loans. While there are several online lenders like BC loans which lend online payday loans, there are offline lenders as well. In case of payday loans, the interest rates and fees remain high and there’s no collateral to the loan. The lender’s paycheck acts as the sole security of the cash advance loan and once the lender receives his paycheck, he is expected to repay the loan.
On the other hand, installment loans are short term unsecured loans given to borrowers. Their interest rates are also high enough but not as high as cash advance loans. The repayment term of the loan is usually through a definite amount of time and the borrower can easily pay back in installments.
The striking differences between payday loans and installment loans
Payday loans and installment loans are usually deemed as ‘small-dollar yet high-cost’ loans. Although the loans are similar in their own way, there can definitely be few big differences like:
- Payday loans come between $100 to $1500 while installment loans come from $150 and range to a few thousand dollars
- Payday loans are paid back in 30 days and installment loans are paid over few months
- Payday loans can be paid back through a post-dated check and installment loans should either be withdrawn directly or paid with check
- Payday loans are unsecured loans and installment loans can either be secured or unsecured
Which loans should be your best option?
Well, there are indeed too many things to consider before thinking which kind of loan should be the best option for you. Here are few considerations to take into account.
- How much funds would you require and for how long time will you need the cash? If the amount is pretty small and time is quick, consider a payday loans. For larger amounts, opt for an installment loan.
- What kind of credit rating do you have? If you have a poor and tarnished one, go for payday loans as lenders don’t check your rating. In case you have a good score, get an installment loan.
- In what way are you going to repay the loan? If you think you can repay it by once, payday loans are ideal and if you don’t think you can do so, installment loans are better options.
- How will both loans impact your score? In case you fail to make payments towards both the loans, it will hurt your score. While repaying your payday loans on time won’t improve your credit score, repaying installment loans on time can benefit your score.
Therefore, depending on the type of financial situation you’re in, you have to choose the right kind of loan. Take into account the above mentioned factors and make an informed and measured decision.
