Yusra3
VIP Contributor
When facing a cash crunch, you may be weighing taking out a payday loan versus an installment loan. However, there are major differences between these two loan types that make one option significantly better than the other.
Payday loans are small-dollar, short-term loans that must be repaid in a single lump sum, typically within two weeks. They charge extremely high fees equating to triple-digit annualized interest rates of 400% or more. Missing the tight repayment window traps borrowers into rolling over the loan and accumulating even higher fees.
Installment loans, on the other hand, provide more money upfront and allow you to pay it back over an extended period through affordable monthly installments. Interest rates can still be high for borrowers with poor credit, but are far more manageable than payday rates that quickly spiral out of control.
While convenient, the sky-high recurring fees on payday loans create cycles of debt that are extremely difficult to escape. Installment loans are the more responsible and cost-effective option for accessing cash when you need it most. Avoiding payday loans altogether is typically the wisest financial move.
Payday loans are small-dollar, short-term loans that must be repaid in a single lump sum, typically within two weeks. They charge extremely high fees equating to triple-digit annualized interest rates of 400% or more. Missing the tight repayment window traps borrowers into rolling over the loan and accumulating even higher fees.
Installment loans, on the other hand, provide more money upfront and allow you to pay it back over an extended period through affordable monthly installments. Interest rates can still be high for borrowers with poor credit, but are far more manageable than payday rates that quickly spiral out of control.
While convenient, the sky-high recurring fees on payday loans create cycles of debt that are extremely difficult to escape. Installment loans are the more responsible and cost-effective option for accessing cash when you need it most. Avoiding payday loans altogether is typically the wisest financial move.
