Whether you need a bit of extra cash to cover unexpected car repair expenses or to make the rent payment on time, payday loans and fast installment loans are viable options. But how do you decide which option is right for you? Learn more about the pros and cons of each option so you can make an educated decision.
Pros and Cons of Fast Installment Loans
Fast installment loans — also referred to as short-term loans — offer an alternative to the traditional payday loan. Like payday loans, fast installment loans provide borrowers with cash quickly — although it’s not always instantaneous. However, the loan is repaid on an preset schedule instead of in one lump sum. This keeps you from falling into a borrowing and repaying cycle with each paycheck.
Fast installments loans are readily available online. Qualifying for fast installment loans isn’t terribly difficult — most lenders have a specific set of qualification guidelines available on their websites for borrowers to review, so you should be able to determine whether you qualify for the loan before applying. And many lenders do lend money to people with less-than-perfect credit.
The one drawback about fast installment loans is that they typically have higher annual percentage rates (APR) than traditional bank loans. This is because most of the loans don’t require collateral, so it’s riskier for the lender. However, when you’re looking for a fast installment loan, you can look for one with loan terms that allow you to repay the loan quicker to lower the overall amount of interest you pay.
Pros and Cons of Payday Loans
Payday loans might be a good option for someone who is desperately in need of cash, but they often come with a hefty price tag. It’s important to understand what you’re agreeing to before taking out a payday loan.
The good thing about payday loans is that you receive the cash you need immediately. You simply walk into a payday loan store, fill out the application, give them your bank account information for repayment, and they give you cash. However, obtaining cash immediately is the only good thing about getting a payday loan.
When you obtain a payday loan, all of the money you borrow — plus the insanely high-interest fees — need to be repaid completely with your next paycheck. This often throws borrowers into a cycle where they require a payday loan each time they get paid because they need some or all of the money from their next paycheck to pay the bills. Because of this, payday loans are not ideal for anyone living paycheck-to-paycheck. You should only obtain a payday loan if you need cash immediately, and you have enough extra cash on your next payday to cover the loan amount and all of the fees.
If you’re going to apply for a payday loan, you should definitely shop around and learn more about payday loans first. Some companies offer lower fees than others, and the requirements vary between lenders. Ideally, you should select the option with the lowest fees to make repayment easier. However, if you can wait a few hours or a day for the cash, fast installment loans are probably a better option for you.
There are pros and cons to fast installment loans and payday loans. However, for the typical person living paycheck-to-paycheck, fast installment loans are usually a better option. In addition to the interest rates being slightly lower than that of a payday loan, more flexible repayment terms ensure you don’t get stuck in the seemingly never-ending payday loan cycle.