If you are considering your loan options, you have more than likely cross paths with paycheck loans and installment loans. There are pros and cons to both. However, you can see that these four reasons make installment loans the better choice.
Larger Loan Amounts are Available
Hearing the term “paycheck loan” you’d assume you could take a loan up to the amount of your paycheck. However, this is not the case. Typically the loan ranges from $100 to $1500. In extreme cases, this may not help you at all. And, you certainly do not want to take multiple payday loans to cover your need. However, an installment loan is available up to a few thousand dollars. Although you have access to it, it doesn’t mean you should take the maximum amount you qualify for.
Longer Duration to Pay Them Off
A payday loan is meant to be paid back in 30 days or less, typically in full by your next paycheck. However, an installment loan is meant to be paid over a particular term, up to a few years in some cases. You have a longer term to pay them off making your monthly payments more manageable than a paycheck loan.
Can Help Improve Your Credit Rating
To apply for a paycheck loan, your credit does not need to be run. It’s all based on having a taxable income. So the payments you do make have no impact on your credit report. However, an installment loan does require a credit check, and your payments will be reported to the three major credit bureaus. This can help increase your credit score should you make each payment on time. This also gives you a positive open line of credit history.
Lower Interest Rates
As mentioned, paycheck loans are not credit based. It’s a loan of immediate need. So whatever your circumstance, taking one of these loans is a dire need, and paycheck lenders do prey upon that. You’ll find the interest rates are well over 300 percent. However, an installment loan can start as low as 6 percent. So not only are you looking at more manageable monthly payments but will pay less interest over the duration of the installment loan.
As you can see, there are pros and cons to both paycheck and installment loans. However, installment loans give you the better payment terms and loan amount you need.