Are you aware of installment loans and payday loans? They can help you overcome financial crises in your life. Below are some crucial factors that help you make a wise decision when choosing the right loan for your needs. Installment loans are loans that allow you to borrow a fixed amount of money and repay it in installments over an agreed period of time. Payday loans are loans that allow you to borrow a fixed amount of money and repay it in full on your next payday. Installment loans are usually more expensive than payday loans, but they offer more flexibility in repayment.
Installment loans are also better for those with poor credit, as they are often more willing to lend money to those with bad credit. But, payday loans are more suitable for those who need cash and have bad credit.
Know the Difference between Installment Loans and Payday Loans
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Purpose
Installment Loans: You apply for an installment loan when you have got long-term financial needs to cover. Some of the ideal instances during which you find such loans to be handy are auto bill payments, home mortgage clearances, and medical charge settlements.
Payday Loans: Are you in need of quick cash? Get the money credited to your account with a single click of the mouse. Borrowers apply for a payday loan during classic instances, such as avoiding late payment charges on credit cards. They also handle unexpected situations, such as accidents. They prevent unnecessary late payment charges on utility and other bills.
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Amount
Installment Loans: Each borrower gets a loan amount that ranges between $1,000 and $10,000 generally depending upon personal criteria. Approaching a seasoned lender to ensure everything an effortless process is essential.
Payday Loans: A loan amount anywhere between $100 and $1,000 is available readily once a borrower becomes eligible. Online processing of payday loans makes them to be more reliable for borrowers in comparison to other loan types.
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Tenure
Installment Loans: These loans offer the most flexibility of repayment that no other loan could offer. The payback period could be set in equal amounts for a couple of months or could be extended for over 30 years.
Payday Loans: In comparison to installment loans, payday loans come with a strict repayment policy. The trick here is the shorter your borrowing period is the lesser your interest payment amount will be. You can choose a repayment date a few days or several months in the future. The date depends on the amount you borrow and your repayment capacity.
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Credit Score
Installment Loans: Though maintaining a good credit score is necessary owing to financial reasons, it hardly poses any problems in case of an installment loan. This type of loan depends on borrowers’ financial capabilities, not their negative credit scores. Borrowers need to repay the loan.
Payday Loans: These loans may or may not need a positive credit score based upon the norms set by your lender. But, the credit score will be affected in case the loans are not repaid on time.