Should You Take Payday or Installment Loan?
Guest post by Bree Diaz
You won’t lack options when it comes to borrowing money nowadays. There are the credit unions and banks that are ready to lend you a sum of cash if you qualify for it. Just visit these brick-and-mortar institutions, submit your loan application, and wait for the approval.
Another popular means to get a loan today is through online lending companies. Yes, borrowing money has never been more accessible during the age of the internet. Two loan options that you can get online are installment loans and payday loans.
If you want to apply for either of these loans, you’ll be in good standing if you know beforehand the difference between the two.
Online Installment Loan: Defined
A lot of people in need of money go to online lenders to apply for installment loans. This type of loan is in-demand because of its beneficial repayment structure and accessibility. The amount you borrow from the lender, along with its interest, is split into installments. This is a boon for borrowers because they can manage their payments well.
There are several forms of installment loans, namely: personal loans, car loans, mortgages. With these loan products, the money you’ll borrow will be given to you in a lump sum. You have to pay back the loan amount and interest in a series of payments over a specified duration of the loan. Check this blog post about online installment loans for more information.
Collateral vs. Non-Collateral Installment Loans
Installment loans can either require a borrower to pledge collateral or not. It’s essential to find out the difference between collateral and non-collateral installment loans.
- An installment loan with collateral is also known as a secured loan. One great example of this is a car loan, which you can obtain provided that you put the car as a security against the money you owe to the lender. Once you can’t fulfill your financial obligation to your lender, he/she has the right to seize the car from you.
- A non-collateral installment loan doesn’t demand the borrower to pledge his/her valuable asset as a guarantee against the loan. Although there’s no collateral that the lender can confiscate, you’ll receive a bad credit score if you don’t pay back what you owe.
Fixed-Rate vs. Flexible-Rate Installment Loans
Installment loans can either have a fixed or flexible interest rate. Learn the difference between these two types of interest rates below.
- A fixed-rate installment loan is great because you’re certain how much you’ll provide to the lender every payment. The rate of interest of this loan doesn’t fluctuate throughout the specified loan term.
- A flexible-rate installment loan has an interest rate that can either drop or rise based on a certain benchmark. If you’re the kind of person who likes to take risks, perhaps this loan is for you.
Qualifications for Online Installment Loans
Getting an installment loan from traditional banking institutions and credit unions requires you to have a good credit score. Your credit profile can also influence the terms and interest rate of your loan.
For borrowers with poor credit ratings, find a lender that offers an installment loan without stringent credit checks. Many of such lenders will still look at your income and other determinants that you’re a capable payer.
Online Payday Loans: Defined
Payday loans are also available online, and they’re perfect for people with poor credit scores who need quick cash. Typically, this type of loan has a short loan term and a high-interest rate. Due to the exorbitant interest rates, payday loans are only good as a last resort.
It’s called a payday loan because your payment for this loan will be taken out of your salary. Basically, you have to provide your bank account or a post-dated check to the lender, from which the lender may withdraw your payments.
You have to take precautions against predatory lenders when searching for payday loans. Some countries require lenders of payday loans to tell the borrower about the annual percentage rates of their loans. This allows borrowers to compare multiple lenders and choose the most suitable payday loan for their needs.
Qualification for Online Payday Loans
Most of the time, it’s not a requirement to have a stellar credit score to obtain an online payday loan. Lenders will only check if you’re of legal age or have a regular income to qualify for this type of loan.
When it comes to borrowing limits, it’s rare to take out a high loan amount from payday loans. Most countries prevent lenders from lending high loan amounts to borrowers, and there are some which prohibit payday loans due to predatory practices by lenders.
Takeaway
It’s now more convenient to borrow money from lenders thanks to the internet. Consider getting an online payday loan or an online installment loan if you need to borrow quick cash. You can learn the differences between these two loan options by reading the information in this post.
