Payday loans are convenient ways to pay for items between paychecks. Installment loans have terms for repayment that can be spread out over many years. Most payday loans are expected to be repaid within a few weeks.
Here are more differences between these two types of loans:
Why Payday Loans are Different than Installment Loans
The main difference between payday loans and installment loans is that payday loans are meant to cover small fast cash loan requirements. To encourage quick repayment, the interest rate can jump enormously in a short time, depending on the terms. Another big difference is that payday loans usually don’t require credit checks. All you need is proof of a regular job.
The attraction to payday loans to many people is that they are approved quickly without much hassle. Some lenders take a postdated check while others withdraw funds electronically from a bank account on a certain date. These loans are ideal for emergencies and can be used for vacations.
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In installment payments, you do not have to repay the money by a specific deadline. Conventional bank loans usually offer interest rates that are inversely related to the duration of the loan. It’s possible to get the lowest possible interest rates through regular banks, provided you have a good credit score.
When to Use Payday Loans
Payday loans should only be used by responsible borrowers who know they can repay the loan quickly. They should never be used as a substitution for income or a reason to quit a job. Payday loans get their name from the fact that you already get paid by an employer and that you are able to pay back the loan on your next payday.
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Sometimes payday loans are a last resort for people with bad credit. They can be very helpful at resolving financial problems quickly. They can help pay for medical bills and unexpected car repairs. These loans can be valuable solutions for students paying for books or money used to start a small business.
Payday loans are one of the best ways to get quick money in your financial emergency.