44.81% of Americans reported taking out loans in the past year. This past year has been rough on many Americans due to COVID-19. This has put many people in financial situations that they never thought they’d be in.
When it comes to taking out loans, you may have the option for a payday loan or an installment loan. Make sure to keep reading to learn about a payday loan vs installment loan.
Amount
When it comes down to the amount you can borrow, these loans differ greatly. Typically you will be loaned more money with an installment loan.
Payday Loan
Payday loans are used to get you between your paychecks. These amounts will vary from $500 to $1000. Just enough to get you through and pay your bills that are due. If you are looking for cash fast, this will probably be your go-to.
Installment Loan
When it comes to installment loans, your amount can range anywhere from $1000-$15,000. This amount can even be higher depending on what you are using it for.
Installment loans are used for debt consolidation or even to pay off a high medical bill. When it comes to choosing how much you are going to take out, you should know what you are going to put that money towards.
Length
The length of these different types of loans will also greatly differ. Since we learned that you can take out significantly more with an installment loan than a payday loan, we’ll now learn about how long it will take to pay back these loans.
Payday Loan
We know that typically you can only take out around 1000 dollars because these loans are very short term. When you take a payday loan, you’re expected to pay it back by your next paycheck, which can range from 10-31 days depending on the contract you sign for the loan.
Installment Loan
Installment loans usually range from months to years, depending on how you set up your monthly payments. Since the amount you can take out is higher than a payday loan you’re going to need more time to pay it off.
You can pay these types of loans off as fast or slow as you want. Usually, when you set up this type of loan, you can look at different payment scenarios to choose which is best for you.
Credit Check
If you are someone who is rebuilding your credit but also needs a loan, then you’ll want to make sure you know which loans require a credit check.
Payday Loan
Payday loans will usually only require a verification of income to make sure that you’ll be able to pay back the loan next paycheck. As long as you have some type of stable income, you should get approved.
If you need help deciding if this is right for you make sure to read the reviews on payday loans.
Installment Loan
Installment loans, on the other hand, will typically require you to have a good or at least fair credit score. This is because they want to make sure you are reliable with your payments and that they will get their money back.
Payday Loan vs Installment Loan: Which is Right For You?
Now that you’ve gotten to read the major differences of a payday loan vs installment loan, it’s time to sit down and see which one is right for you and your financial situation.
Make sure to check out our other articles for more help on your financial situation in these difficult times.