There are a number of differences between installment loans for bad credit and payday loan. The top notch being that installment loans involve higher rates and friendly terms for the borrower. However, they aren’t the same as payday loans. Some of the major differences are given below:
- Installment loans for bad credit has a widely ranging APR which is around 35% while for payday loans, the APR can be as high as 400%
- You need to make a series of fixed payments for a particular time period in installment loans while in payday loans, you have to make a single payment with your paycheck.
- The amount of loan for installment loads may range from a several hundreds to a few thousand dollars while for payday loan the amount is very small say $500.
- There is a hard inquiry for your credit in installment loans while there isn’t any hard inquiry on your credit for payday loans.
- The loan repayment history is shared with credit bureaus in installment loans to build your credit score while it is not done in payday loans.
Often some lenders may not tell you the different between installment loans and payday loans. So, when you are applying for an installment loan, make sure you are very clear with the loan amount, tenure and repayment schedule. One thing which both the loans have in common is that you will get the delivery of the funds on the same day or the next business day. It is important to pay attention to the APR of both the loans when going for a loan.
Alternatives available for installment loans for bad credit
Though installment loans for bad credit offers better terms to the borrowers in comparison to the payday loans but the interest rates are very high!
So, before you apply for any loan, you should ensure that you have seen all your options of borrowing like getting credit counseling, speaking and bargaining with your present creditors to get more time to repay the funds and shopping for a better interest rate.
Keeping the payment schedule in mind, no doubt installment loans are a way better option in comparison to the payday loans. But because the rate of interest may be comparatively higher for installment loans for bad credit, it is important that you shop around and find out the best lender who can offer you right interest rates even with your low credit score.
Verdict
Today, borrowers with poor credit rating have several options for installment loans. Hence, it is important to analyze all your options before you pick anyone and ensure it will work for you.
Make sure you don’t fall for marketing which tries to offer you a high interest rate in the form of payday loan. Find out about the specifics and then only proceed. Make sure you look for the repayment schedule and payment methods which work perfectly for you. Once you make the right choice, the loan will never be a burden for you.