Differences Between Payday Loans & Personal Installment Loans
Most of us consider that direct lenders are specialized in providing payday loans. So, are online installment loans for bad credit a type of payday loan? No! Usually, payday loan lenders offer payday loans to help you pay for minor expenses like utilities or grocery bills. But installment loans with fixed monthly payments cover credit card refinancing or other significant costs.
But let’s make a shortlist of significant differences for an easier understanding:
- A payday loan is a small cash advance you borrow to pay for minor emergencies. You may get the minimum loan amount is $100, and the maximum amount does not exceed $1,000. But personal loan amounts range from $1,000 to $5,000.
- The payday loan minimum term is 30 days compared to a personal loan term that exceeds two months and may reach 24 months.
- The annual percentage rate of payday loans is higher than an online installment loan. It happens because of the state laws or differences between payment periods. So, before accepting a loan, read the terms and conditions carefully.
- Payday loans’ repayment process consists of paying back one lump sum on the due date or the next paycheck. Meanwhile, an online personal loan is paid with an equal monthly payment and has fixed interest rates. It turns out that these loan payments form flexible repayment terms that won’t bring you into a debt cycle.
- Payday loans are considered unsecured loans. It means that there is no need to present collateral to get the money. Guaranteed personal loans may require valuable things to secure their funding. It may be a vehicle, real estate, or other expensive objects.
Before submitting a loan application form, find out that in the case of installment loans online, the loan provider may report your information to credit bureaus in the case of installment loans online. However, most lenders may perform a soft credit check that won’t affect borrowers’ already bad credit scores. So, before applying for this type of loan, consider the average credit score of 699. This figure should be your milestone when thinking about borrowing loans.
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