{"id":740253,"date":"2018-07-04T23:02:44","date_gmt":"2018-07-05T03:02:44","guid":{"rendered":"https:\/\/www.finder.com\/ca\/?p=740253"},"modified":"2025-05-22T15:40:11","modified_gmt":"2025-05-22T19:40:11","slug":"payday-vs-installment","status":"publish","type":"post","link":"https:\/\/www.finder.com\/ca\/payday-loans\/payday-vs-installment","title":{"rendered":"Payday loans vs installment loans"},"content":{"rendered":"

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.<\/p>

Understanding installment loans<\/h3>

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 fair to bad credit.<\/p>

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.<\/p>

Payday loan vs installment loan features<\/h3>
Feature<\/th>Payday loan<\/th>Installment loan<\/th><\/tr><\/thead>
 <\/p>

Loan amount<\/td>

$100 – $1,500<\/td>$500 – $10,000<\/td><\/tr>
Loan term<\/td>By your next payday, up to 62 days<\/td>3 - 60 months<\/td><\/tr>
Annual percentage rate \n \n <\/use>\n <\/svg>\n The interest rate and fees expressed as an annual cost<\/span>\n<\/button><\/td>Typically over 300% (borrowing fee is $14 for every $100 borrowed)<\/td>18% - 35%<\/td><\/tr>
Turnaround time<\/td>Instant<\/td>Within 24 to 48 hours<\/td><\/tr>
Eligibility requirements<\/td>Flexible – accepts bad credit and non-employment income<\/td>Less flexible – has credit score and income requirements<\/td><\/tr><\/tbody><\/table>

Payday loan vs installment loan: $700 example<\/h3>

Let’s say a borrower in Ontario wants to borrow $750<\/a> and is debating between payday loan and installment loan. Here’s how the cost can break down.<\/p>
Feature<\/th>Payday loan<\/th>Installment loan<\/th><\/tr><\/thead>
 <\/p>

Loan amount<\/td>

$750<\/td>$750<\/td><\/tr>
Borrowing cost<\/td>$14 per $100 borrowed = $105 (365% APR)<\/td>35% APR<\/td><\/tr>
Loan term<\/td>14 days<\/td>6 months<\/td><\/tr>
Payment amount<\/td>One full payment of $855<\/td>$138.07 monthly for 6 months ($78.40 in total interest)<\/td><\/tr>
Total loan cost<\/td>$855<\/td>$828.40<\/td><\/tr><\/tbody><\/table>

If you’re looking at the dollar amounts, the installment loan is around $30 cheaper. 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.<\/p>

How to choose between a payday loan and installment loan<\/h3>

Both are high-interest loans. Generally, a payday loan<\/a> 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:<\/p>