Approximately 78% of all American workers live paycheck to paycheck. People who live this way tend to need loans from time to time to pay for unexpected expenses.
If you encounter times when you need some cash to pay for unexpected bills that arise, you could turn to a fast-cash loan.
The two main options you have are installment loans and payday loans. Before you choose one, you might want to learn the differences between an installment loan vs. payday loan.
While these are both excellent ways to get money, they are not the same. Here are some of the most notable differences between these loan types.
Installment Loan vs. Payday Loan: The Most Significant Difference
If you want to know the differences between payday loans and installment loans, you should ask the following two questions:
- What are installment loans?
- What are payday loans?
You can learn the differences in more detail if you view here, but it is helpful to begin with the most significant difference – how you repay each type of loan.
A payday loan requires repayment in a lump sum on a specific date. You might have two to four weeks before the due date or longer.
You repay an installment loan by making equal payments monthly. You might have 12 equal payments for the loan or more. You will know the number when you borrow the money.
The Amount You Borrow Is Different
The second difference between an installment loan and a payday loan is the amount of money you borrow through each type.
In general, you can borrow more money through an installment loan than a payday loan. Payday loans are lower in amounts because they are due faster.
Imagine if you borrowed $2,000 and had to repay it next month. It might be difficult to come up with this amount by next month. If you could pay it off over a year, it would be less challenging.
Therefore, one primary difference to understand is the amount you can borrow through each type.
The Interest You Pay Is Another Difference
The other difference to understand is the interest amount you pay for borrowing the money. The interest rates on installment loans and payday loans might be approximately the same, but the timing is different.
As a result, you pay more interest on an installment loan than a payday loan, primarily because you have the money longer.
Lenders base interest amounts on the stated interest rate and the time a person borrows the money. When you borrow money for longer periods, you naturally pay more interest charges on the money you borrow.
Learn More About Your Loan Options
As you can see, there are significant differences between an installment loan vs. payday loan. After learning these differences, you might know which is right for your situation.
If you still have questions, you can ask a lender.
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