Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.

Payday loan vs installment loan

Which loan should you get if you have bad credit?

There are key differences between payday loans and installment loans, especially when it comes to annual percentage rates (APRs), loan terms and loan amounts. Overall, an installment loan has lower APRs, longer loan terms and larger loan amounts than a payday loan.

Understanding installment loans

An installment loan is a specific amount of money you borrow and pay back in installments with interest over a period of time. Technically, loans such as mortgages and car loans are installment loans, but in the comparison below, the “installment loan” we are referring to is a personal loan offered by alternative lenders to borrowers with bad credit.

Traditional lenders like banks and credit unions also offer installment loans, but since their loans are for borrowers with good credit, we will not compare them with payday loans here.

Payday loan vs installment loan features

FeaturePayday loanInstallment loan
 

Loan amount

$100 to $1,500$500 to $15,000
Loan termBy your next payday, up to 62 days6 months to 5 years
Annual percentage rate Over 300% (borrowing fee is $15 to $25 for every $100 borrowed)18% to 47%
Turnaround timeWithin a few hoursWithin 24 to 48 hours
Eligibility requirementsFlexible – accepts bad credit and non-employment incomeLess flexible – has credit score and income requirements

Payday loan vs installment loan: $700 example

Let’s say a borrower in Ontario is debating between a $700 payday loan and $700 installment loan. Here’s how the cost can break down.

FeaturePayday loanInstallment loan
 

Loan amount

$700$700
Borrowing cost$15 per $100 borrowed = $105 (497.73% APR)46.93% APR
Loan term11 days6 months
Payment amountOne full payment of $805$133.15 monthly for 6 months (98.88 in total interest)
Total loan cost$805$798.88

If you’re looking at the dollar amounts, the installment loan is nearly as expensive as the payday loan. The key difference here is the loan term. An installment loan allows you to spread out your payments over several months. But watch out for longer loan terms, because if the loan term becomes too long, you may end up paying more in interest than a payday loan.

⚠️ Warning: Be cautious with payday loans
Payday loans are expensive. If you're experiencing financial hardship call Credit Counselling Canada for free financial counselling (Monday-Friday 8:00am-5:00pm at +1 866-398-5999). Consider alternatives instead of a payday loan:
  • Local resources. Government programs and nonprofits offer free financial services and help with food, utilities and rent.
  • Debt relief companies. There are services to help you reduce your debt payments.
  • Payment extensions. Talk with bill providers about longer payment plans or due-date extensions.
  • Side jobs. Sell unwanted items online, sign up for food delivery and more.

Compare payday loans

1 - 4 of 4
Name Product Loan Amount Loan Term Interest Rate Turnaround Time Serviced Provinces Offer
Money Mart Payday Loan
$120 - $1,500
1 - 62 days
Varies by province
As little as 1 hour after getting approved
AB, BC, MB, NS, ON, SK
To be eligible, you’ll need to be at least 18 years of age with a steady source of income and a chequing account. No credit check required.
Cash Money Payday Loan
$100 - $1,500
5 - 40 days
Varies by province
As little as 15 minutes with INTERAC e-Transfer
BC, NL, NS, ON, SK
Apply for your first $300 payday loan at a $20 cost (excludes SK applicants).
Have your banking details ready to get a loan in 2 hours. You'll need to be 18 years of age or older and have a net income of at least $1,000/month. Residents of MB and NB must apply in-store for a loan.
iCASH Payday Loan
$100 - $1,500
7 - 62 days
Varies by province
As little as 2 minutes with INTERAC e-Transfer
AB, BC, MB, NB, NS, ON, PEI
Get up to 20% in cash back once your payday loan is fully repaid. Conditions apply.
To be eligible, you'll need to be at least 19 years of age and have a net income of at least $800/month deposited into your bank account.
GoDay Payday Loan
$100 - $1,500
Up to 62 days
Varies by province
As little as 2 minutes with INTERAC e-Transfer
AB, BC, MB, NB, NS, ON, PEI, SK
To apply, you'll need to be a Canadian resident over the age of 18 with a valid email address, phone number and an open bank account with a Canadian bank or credit union.
loading

Compare up to 4 providers

Maximum borrowing costs per province
Always refer to your contract for exact repayment amounts and costs as they may vary from our results.
Province Maximum allowable cost of borrowing
Alberta, British Columbia, New Brunswick, Ontario & Prince Edward Island $15 per $100 borrowed
Manitoba & Saskatchewan $17 per $100 borrowed
Nova Scotia $19 per $100 borrowed
Newfoundland and Labrador $21 per $100 borrowed
Northwest Territories, Nunavut & the Yukon $60 per $100 borrowed
Quebec Limit of 35% annual interest rate (AIR)

Compare installment loans

1 - 10 of 10
Name Product Interest Rate Loan Amount Loan Term Requirements Link
Money Mart Installment Loan
29.90% - 46.90%
$1,000 - $15,000
12 - 60 months
Requirements: min. credit score 300
Go to site
More Info
Receive your loan via Interac e-transfer in as little as 2 hours.
Spring Financial Installment Loan
17.99% - 46.96%
$500 - $15,000
9 - 48 months
Requirements: min. income $1,800/month, 3+ months employed, min. credit score 500
Go to site
More Info
If you're not eligible for an unsecured loan, you may be offered a credit builder loan to help improve your credit score.
LoanConnect Installment Loan
32.00%
$500 - $2,500
3 - 6 months
Requirements: min. credit score 300
Go to site
More Info
Get approved by different lenders in as little as 60 seconds with any credit score.
Loans Canada Installment Loan
8.00% to 46.96%
$500 - $50,000
3 - 60 months
Requirements: min. credit score 300
Go to site
More Info
A broker with the largest lender network in Canada. Fill out one application and get matched for free with lenders.
Mogo Installment Loan
9.90% - 46.96%
$200 - $35,000
6 - 60 months
Requirements: min. income $13,000/year, min. credit score 500
100-day money-back guarantee. If you're not happy with your loan, pay back the principal and get your 100 days of paid interest and fees back.
Go to site
More Info
Get a free quote without affecting your credit score and get a loan on the same day. Track your credit score for free.
SkyCap Installment Loan
12.99% - 39.99%
$500 - $10,000
9 - 36 months
Requirements: min. income $1,200/month, stable employment, min. credit score 550
Go to site
More Info
Apply in less than 5 minutes and if approved, receive financing in as little as 24 hours.
Fairstone Installment Loan
26.99%-39.99%
$500 - $25,000
6 - 60 months
Requirements: able to make monthly repayments, min. credit score 525
Go to site
More Info
Get a quote in minutes without affecting your credit score. Finalize your loan application online and get your funds as quickly as the same day.
Cash Money Installment Loan
46.93%
$500 - $10,000
6 - 60 months
Requirements: stable source of income, min. credit score 560
Go to site
More Info
Online installment loans are available in Alberta only. Residents of Manitoba and New Brunswick must apply in-store.
Loan Away Installment Loan
19.90% - 45.90%
$1,000 - $5,000
6 - 36 months
Requirements: min. credit score 300
Go to site
More Info
A lender that approves loans in as little as 20 minutes. Get affordable monthly repayments with any credit score.
Magical Credit Installment Loan
19.99% - 46.80%
$1,500 - $20,000
6 months - 5 years
Requirements: min. income $1,200/month, min. credit score 300
Go to site
More Info
Loans are not available in Manitoba, Quebec or Saskatchewan.
loading

Compare up to 4 providers

How to choose between a payday loan and installment loan

Both are high-interest loans. Generally, a payday loan should only be a last resort because of its extremely high interest rates and short repayment terms. When making a decision, ask yourself the following questions:

  • Can I afford to repay the loan within the loan term? Payments for both payday loans and installment loans will be automatically deducted from your bank account. If you don’t have enough money in it on the due date, you will be charged fees. Make sure you have an exit strategy before taking out a payday loan or installment loan.
  • How much do I need? Payday loans max out at $1,500 (or less depending on your net income).
  • Do you want to pay off the loan in 1 lump sum? Some people prefer to pay off the loan in 1 lump sum rather than stretching it out over months. Payday loans offer that option.
  • How fast do you need the funds? It’s possible to get a payday loan within a few hours. Installment loans take around 1 to 2 business days.

    What do I need to apply for a payday loan vs installment loan?

    Payday loans

    • Be the age of majority. You need to be at least 18 years old (19 in some provinces and territories).
    • Steady source of income. Many payday lenders can accept non-employment income such as Canada child benefit, employment insurance, disability and social assistance. Learn more about payday loans for government benefits.
    • Valid bank account. You’ll need to provide a voided cheque or fill out a pre-authorized debit form.

    Before taking out a payday loan, become familiar with the payday loan regulations of your province.

    Installment loans

    • Be the age of majority. You need to be at least 18 years old (19 in some provinces and territories).
    • Steady source of employment income. Although there are some lenders that accept non-employment income, many require employment income.
    • Meet the minimum credit score. This varies widely among lenders. Some lenders accept a credit score in the 300s or 400s, while others start in the 500s.
    • Valid bank account. You’ll need to provide a voided cheque or fill out a pre-authorized debit form.

    Bottom line

    Payday loans and installment loans from alternative lenders are both high-cost loans that are accessible to borrowers who don’t qualify for traditional loans from banks and credit unions. Before taking out a payday loan or installment loan, compare your options, understand the true cost of the loan and have a concrete plan to repay it.

    Frequently asked questions

    More guides on Finder

    Go to site