What's The Difference Between A Payday Loan And Installment Loan?
With so many types of loans available, it can be very confusing when trying to determine the main difference between payday loan and installment loan options. Which is right for you? It really depends on why you’re borrowing the money, how much you need, and the timeframe you want to repay the loan.
You’ll find out below that the major difference is the amount of money you can apply for, but there are other key differences. At Carolina Payday Loans, Inc., most people can secure a payday loan quickly and easily. But to be sure this is the right loan for your needs, let’s compare and contrast these two popular options.
Differences Between Payday And Installment Loans
A payday loan is generally smaller than an installment loan, most commonly ranging from $100-$550 since they are intended to be repaid with your next paycheck.
An installment loan is usually higher, ranging into the thousands. They are reserved for large purchases that will take time to pay off. Most installment loans are paid monthly.
As we already stated, this is the biggest difference between payday loan and installment loan options.
Payday loans are easy to apply for. All you need is your government I.D., a blank check, and a recent pay stub to get started. You can handle most the paperwork of the payday loan online, without setting foot in the loan office until absolutely necessary.
Installment loans from a bank or financial institution, on the other hand, can require references, tax returns, W-2s, and more. You will need to meet with an assigned loan officer and fill out several pages of documentation before your loan application is complete.
There are also longer wait times for installment loans. While you may get money from a payday loan in 1-2 days, it can take weeks to be approved for an installment loan.
Carolina Payday Loans, Inc. does not run a credit check for payday loans. All types of credit are welcome to apply. The chances of approval are not affected by past credit history.
For an installment, your lender will either run a soft credit check that doesn’t affect your credit or preapproval or they will do a hard inquiry during the actual loan process -- sometimes both.
This difference between payday loan and installment loan options often prevents many applicants from getting a traditional loan.
Applicants with bad credit or no credit are rarely approved for installment loans from a bank or credit union. A much higher percentage of applicants are approved for payday loans due to the less stringent credit requirements.
Payday loans usually require one lump sum as repayment. This payment is due 2-4 weeks after it is taken out in order to make sure it comes after your next payday (this is where the name comes from).
For this reason, it’s important to borrow only what you know you’ll be able to pay back, interest and all, within the given time.
Installment loans are paid back in payments — as the name implies. You will have several months or longer to pay back an installment loan, which is good since they are larger sums of money. Examples of installment loans include car loans, student loans, mortgages, and other large purchases.
Are There Any Similarities Between Payday Loans And Installment Loans?
There aren’t many similarities between payday loans and installment loans. One is for quick cash in emergency situations, while the other is designed to finance more expensive items.
The one caveat is short-term installment loans. These loans, along with payday loans, can be used for rent, groceries, utilities, and emergencies. However, short-term installment loans are not as common. Basically, these two loan types stand in stark contrast to one another.
Which Type Of Loan Is Right For You?
Now that you understand the difference between payday loan and installment loan options, it’s important that you choose the right one for your situation. The type of loan you apply for truly depends on your situation.
For immediate needs and short repayment periods, payday loans can get you out of a tight spot. Installment loans are more beneficial for buying higher-priced items that you aren't able to save up for in full, such as a home, car, or college tuition. Being honest about your financial need is the first step in getting the right loan.
What To Do If You Need Cash Fast
If you’ve been blindsided by a financial burden, payday loans can get you through the next few days or weeks without having to worry about basic necessities. To apply for a payday loan online with Carolina Payday Loans, Inc., fill out the brief online form and wait for a representative to contact you.
Within a day or two, you could have the cash you need to cover bills and other expenses without any added stress. Loan representatives are available to help if you have any questions.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.