How payday loans differ from installment loans
Among all the available loans in the UK, a payday loan is judged as the most accepted loans among the borrowers. Many people are also taking payday loans to develop their economical condition. Gradually, these loans have turned into a first-aid to their all sort of financial problems. But the loan has one competitor that also has gained enough reputation among the borrowers is installment loan. Here the key distinctions among these trendy loans are discussed.
Characteristics of high cost loans
The higher default rate is one of the top most characteristics for the high cost short term credits. Little amount of cash and short duration are also important characteristics of high cost credit. It appears that the interest is too high for the lenders to take some risks as well.
What does a payday loan mean?
The loan that could be borrowed and repaid by the ending of a month is called payday loan. The name is drawn from the fact that someone can pay back the credit at the ending of a month when he gets the salary. Payday loans are growing popular day by day with them who look for money from a second source rather than relatives or friends. Payday loans might be ideal for them. In the track of time, the financial pressure is gradually becoming personal, and numerous people are in quest of getting these loans.
What does an installment loan mean?
In the reign of consumer finance, installment loans are comparatively a newer concept. There are several repayment systems in installment loans where it can be repaid within some time durations. Depending on the amount of money you borrow, the time span might be varied. It can be for two months or sometimes it can be for even a year or more. Installment loans are catching up with the payday loan in term of popularity as the many customers are using these loans. Because, the loans suit better for the borrowers who are surviving in an era when the financial situation changes. Day by day, the living costs getting higher, but the wages are the same level as before. People now are always under pressure to meet their demands. For this, installment loans have come under the limelight. The main difference that makes installment loans unique as it can be renewed on a monthly basis. Now in this age, we have a lot of must-to-be-fulfilled necessaries like paying car loan, gas & electric bills and others. So people are fighting every day with their daily finances and this is where installment loans come helpful for them.
Main ideas how Payday loans differ from Installment loans:
- It can be repaid after getting your monthly salary. So the timescale here is 30 days or a month.
- The main objective of payday salary is to reduce the gap between cash shortage and salary arrival
- Normally yon can have a loan of only a little amount of cash like $50 or $100.
- It has higher rate of interest.
- It can be repaid through direct debit by using your existing bank account.
- As per the lenders’ views, these loans are a little bit risky as the borrowers need not to put up any asset to obtain the loan.
- It can be paid off as per the predefined time duration. During this period loans are paid across several dates.
- You have the chance to pay in some installments that you can earn within this period.
- Since a long time is needed to repay the cash, so these are long term high cost loan.
- In contrast to payday loans, installment loans have a longer time scale and this longevity has both pros and cons for your economical condition.
The main users of payday loans:
Considering your income, payday loans might be a good choice of you. Before taking payday loans, be ensured that your life has the following characteristics:
- If you are in debit despite having a stable job
- If you like to keep your dealings of money aside from your family and friends
- If you remain in an economic crisis just before the start of a month
- For a fussy reason, you need small cash
- If there are some sudden issues with your cash flows.
The main users of installment loans
Before stepping into the world of installment loans, be ensure that you are the one among the people having the following characteristics:
- If you desire a loan that you have a desire for repaying it over several months
- It is inflexible for you to pay off a loan without delay.
- If your financial condition is strong enough to run repayments options
- If you require a high amount of money
Either Payday or Installment which Loans You Should Prefer
It is often too confusing to choose either payday loans or installment loans. The quick guides for you that might be helpful to decide which loans you should prefer:
The required amount
Say, you are a service holder and suddenly you might be needed some amount money like £300. In this case, you might be enthusiastic about to accept a loan of £600 or £500 through installment loan. Here, it is unbeatable to be inclined towards a payday loan. While you are looking forward to a little amount, you should better make a choice of payday loan. For boosting your cash in a short duration, there is no alternative of installment loan. Based on the amount you need, you could select a loan and can manage your money properly.
A steady job
If you wish to move for an installment loan, having a steady job is important for that. Paying off the installment on time is a significant matter. In case of high cost loans like installment loan, obviously, it is mandatory to be up to date with each month’s repayment.
Probable financial behavior
Probable finance of you is an important requirement prior to going for an installment loan. Over the time span, you simply cannot expend to the money that you want. You are bound to be more vigilant about your spending as you should repay it at the ending of each month. If you have money from installment loans, it is not a wise decision to be expensive randomly. You need be watchful about your timely repayment.
One thing you need to think about that you might be in debt from this sort of loans. So there is a high possibility of cash crunch if you are unable to earn the amount that you need to repay. By following a predictable schedule you can stay tuned about your installment loan repayments. Here, payday loan has an advantage as you need to repay the whole money at once after getting the salary.
If you are upright with a clear idea about your financial conditions, you may consider any of them. It is to be remembered that how much amount you could repay according to your earnings. If you are okay with the monthly deadline of payday loan or several repayment methods of installment loans, you may pursue short term credit method.