Understanding Payday Loans vs Installment Loans
Life is a tailor of the unexpected, and sometimes events that need you to dig into your pockets happen when you don't have the money to fund them. Some challenges that call for quick cash on hand could be:
- An unanticipated car accident.
- An appliance suddenly breaks.
- A hospital visit.
When most people find themselves in such a situation, they turn to either payday or installment loans for quick cash. Payday loans and installment loans are the most common personal cash advances that people consider when in an unexpected cash crisis.
However, the two types of personal loans are different. They differ on features such as what you need to qualify, payback terms, and costs, and you may be wondering which is suitable for you. If so, don't worry; you're in the right place.
DoNotPay is here to guide you and help you figure out which best suits you. Read on to learn more as we double down on payday loans vs. installment loans and how DoNotPay can help.
Payday Loan vs Installment Loan: Differences in Loan Terms
Payday and installment loans are two ways to get the funds you need to cover unexpected life necessities. They differ in payment terms, however.
|Installment loans||The loan terms on installment loans vary depending on the type of installment loan you want to take. Installment loans such as mortgages usually have a loan term of 15-30 years. You can pay monthly, quarterly, or even annually.
For medium-sized installment loans such as motorcycle and car loans, the term ranges between 5 and 15 years, and monthly payments.
The loan terms for small personal cash advances are much shorter, though this depends on the amount. You may need to repay the loan in a few months or years. Payments can be monthly or even weekly for small loan amounts.
|Payday loans||On the other hand, as the name suggests, payday loans are meant to cover you until your next payday. A borrower is expected to pay back their loan on the next payday, and so you'll have less than a month to settle the loan.
However, the repayment plan may change, especially if you roll your current loan into another one or get a deferred payment plan.
How Do Costs Between Payday Loans vs Installment Loans Compare?
Payday loans have low principal payments, but their interest rates are high. The high-interest rates are due to bad credit scores among payday loan borrowers and the small loan amounts. Payday borrowers usually need loans to buy essential items, and lenders take advantage of that to charge substantial interest rates, which makes the loans relatively expensive.
You can, however, opt for payday loan consolidation, an option that allows you to combine loans with high-interest rates into one with a lower interest rate.
Installment loans usually have lower interest rates. The costs vary depending on the loan amount, and large installment loans typically have lower interest rates than small ones. However, the principal payments are greater for large installment loans.
What Are the Qualification Requirements for a Payday Loan vs Installment Loan?
You can easily qualify for a payday loan than an installment loan. The credit score requirements for payday loans are much less rigid. Besides, you may not need to put up collateral or verify your income. All you need is to be a U.S. citizen above 18 years and provide some form of identity verification.
For installment loans, you'll need high credit scores. Banks and credit unions that give out installment loans want to ensure their funds are safe and borrowers have higher chances of repaying their loans. Therefore, these institutions set high credit scores and require good credit reports.
What Are the Loan Amounts for a Payday Loan vs An Installment Loan?
You can get a payday loan ranging between $25 and $500. Although some lenders give up to thousands of dollars, such loans are tough to pay off.
Installment loans come in different sizes and can be as low as $25 for a small personal loan and tens of millions of dollars for large loans such as mortgages. The loan amount depends on the type of installment loan you are getting and can vary depending on whether the lender is satisfied with giving you the total loan amount or not.
How to Determine the Best for You Between a Payday Loan and an Installment Loan
Well, determining what is best for you between a payday loan and an installment loan boils down to how fast you need the cash and which you qualify for. For example, let's say you have a good credit score and are eligible for an installment loan, but you need the money urgently. In such a case, you may be forced to take a payday loan and pay the high-interest rates because it 's easily accessible and processed faster than an installment loan.
Similarly, you may need a big loan but cannot find a payday loan provider to process it. So, in this case, you have no option but to go for an installment loan.
DoNotPay Can Help You Lower Your Payday Loan
If you're thinking about taking a payday loan, but you're worried about the high-interest rates you'll have to pay, or you want to lower your payday loan but don't know where to start, DoNotPay has got your back. We can help you reduce your payday loans legally .
Follow these 5 easy steps to lower your payday loan:
- Visit DoNotPay and search "Negotiate Payday Loans."
- Now fill in the state you took out the payday loan in.
- Tell us the amount you borrowed, the date you took out the loan, and when the payment is due.
- DoNotPay will automatically calculate the APR on your behalf, and determine the best way to negotiate your case based on the amount.
- That's all! Click to generate your personal negotiation letter and use it to reach out to your lender to get better terms for your loan.
Why Use DoNotPay to Lower Your Payday Loan?
DoNotPay is an excellent solution to get relief from overly priced payday loans.
Our services are:
- Fast: DoNotPay automatically calculates the APR on your behalf and within minutes provides you with the best way to lower your payday loan
- Easy: Everything is done with just a click of a button and at the convenience of your home.
- Successful: DoNotPay has a good track record of helping thousands of people in the U.S. lower their payday loans, and therefore, you can rest assured that you're in good hands.
What Else Can DoNotPay Do?
Apart from helping you lower your payday loan, DoNotPay can do much more for you.
We can help you with:
- Financial aid appeal letters
- College fee waiver
- Reducing property taxes
- Free raffle tickets
- Robocall compensation
- Help with bills
Reach out to us to learn more about how we can help you avoid other unnecessary charges.