Differences Between Payday Loans and Installment Loans

It’s not uncommon for contemporary consumers to struggle with paying bills even when they work regularly. Needing to borrow money in order to keep up-to-date on important bills or deal with an unexpected crisis shouldn’t be difficult, and it shouldn’t wind up costing a fortune. Many consumers facing financial emergencies wind up taking out payday loans, but that’s not always the most financially sound decision.

Maxlend Loans offers an alternative to utilizing the services of payday loan lenders. Read on to find out about installment loans and some of the differences between these and payday loan solutions below to find out why it’s usually better to choose this alternative.

What is a Payday Loan?

Payday loans tend to offer small amounts of money that can be repaid in one paycheck. While they do offer a means of getting access to a little bit of extra cash, the amount that consumers are allowed to borrow is rarely large enough to cover the cost of anything but minor emergencies.

This type of loan must be paid back in full right away and often comes with high interest rates, which can leave borrowers in a position where they are forced to routinely take out payday loans. Over time, the fees and interest can add up substantially.

What is an Installment Loan?

As the name implies, installment loans are usually paid back over a longer period of time in smaller installments. The repayment schedule will be prearranged prior to finalizing the loan but is usually determined according to how often the customer receives his or her paychecks. Lenders who offer installment loans tend to be able to provide larger amounts of money than payday loan providers.

Because installment loans can be repaid in small amounts over a longer period, they are less likely to leave consumers facing repeated financial crises. These types of loans are typically repaid within six months, although most of the time, lenders do not charge fees for early repayment. Keep in mind that borrowers interested in installment loans must meet minimum income requirements and several other loan eligibility criteria prior to being approved, but know that those who are approved can usually borrow larger sums of cash.