Short-term "quick cash" loans that have easy approvals are the top loan products in the nation. Two of the most popular types of quick cash loans are the payday loan and the installment loan. The differences between the two are as follows:
The payday loan received its name from its qualifying criteria and its repayment requirements. The idea is for the borrower to repay the advance plus applicable fees within a short time period. The monies that the borrower uses to repay a payday loan should come from his or her paycheck. Payday loans are short-term products that have an average life of approximately 14 days. Lenders generally do not check a person's credit to qualify him or her for a payday advance. Instead, the lenders check the person's ability to repay the advance. Applicants for payday loans need to have stable jobs, valid bank accounts, and monthly incomes that meet the lenders' requirements. A person can borrow an amount of money that is between $100 and $1,500.
Installment loans are very similar to payday loans. The major difference between the two products is their repayment schedule. Many debtors were having problems repaying payday loans because of their short-term repayment requirements. Lenders started issuing installment loans to ease the burden for such consumers. A borrower can take an installment loan, and the lender may give that person 45 days to 90 days to repay it. The borrower can make small equal payments over time instead of being hit with one large payment.
Generous installment lenders may give their borrowers up to one year to repay the advance. The qualification requirements for an installment loan are similar to the requirements for a payday loan. The applicant must be 18 years of age, working at a reliable job, and prepared to repay the advance. However, the borrower will have much more time to repay an installment loan than he or she will with a payday loan. Installment loans have a better repayment ratio than traditional payday advances have.
Which One Is Best?
A consumer should look at his or her financial profile before deciding whether to take a payday loan or an installment loan. People who have quick emergencies would be better suited for a traditional payday loan. Struggling consumers who may have difficulty with a quick repayment should seek installment loans.