The most basic difference between payday loans and installment loans is the period they allow the borrower to pay back the money. Payday loans have shorter repayment durations compared to installment loans. Another significant difference is the interest rate one has to pay on these two loans, which is higher for payday loans.
Payday Loans
A payday loan is a loan people usually get during financial emergencies for short-term relief. As it is a short-term loan, it has to be repaid on the next payday. Usually, the return times are around 2 weeks. Besides, it is an unsecured loan, meaning there is no need to put up collateral.
One downside of payday loans is that they carry a high-interest rate. It becomes unmanageable for the borrower to repay, and the worse part is the short repayment duration. Also, getting another loan to repay the current loan will only lead to paying the principal amount and high-interest rates again.
Personal Installment Loans
Personal installment loans are another option and are more manageable than payday loans. They are also unsecured and can be availed even if you don't have a perfect credit score. Besides, installment loans have a longer repayment duration, generally from 6 months to a few years.
When requesting a personal installment loan, make sure you are capable of managing your finances and repaying the loan with interest within the agreed time. The long repayment duration of installment loans only proves helpful if you manage your budget strategically while paying off the loan.
Though installment loans have lower interest rates and more flexibility, they are a long-term solution. On the other hand, payday loans are a short-term solution for financial emergencies. No matter what loan type you choose, always make sure you can repay it on time to avoid increasing your financial burden.
Conclusion
Both payday loans and installment loans can help you. However, the first one has higher interest rates and a short repayment duration, and the latter has low-interest rates and longer repayment duration. In a nutshell, installment loans are ideal for long-term and payday loans for short-term emergency loans. Now, you need to decide which one will work for you.