The real difference between payday and installment loans | finder.com
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Compare payday loans and installment loans

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Find out which option is right for you

If you’re on the lookout for a fast loan or have bad credit, you might be considering an installment loan or a payday loan — also referred to as a short-term loan. To help you decide which one is the better choice for what you need, we’ve broken down each loan type to help you understand the differences between the two.

OppLoans Installment Loans

OppLoans Installment Loans
  • Easy online application
  • Quick approval
  • Fast funding
  • Long repayment terms

OppLoans Installment Loans

Installment loans with competitive rates from a top-rated direct lender.

  • Minimum loan amount: $500
  • Maximum loan amount: $5,000
  • Turnaround time: 1 business day
  • Loan term: 9 to 36 months
  • Must have direct deposit and meet minimum income requirements
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Quick definition: payday loans vs. installment loans

Payday loans

These are small credit solutions of around $100 to $1,000 designed to be repaid in the short-term. These loans can be applied for by people with less-than-perfect credit history and repaid in one lump sum, usually on your next payday. The annual percentage rate (APR) for these loans is quite high, usually in the hundredth percentile, but the actual rate you are offered depends on the state you reside in. Payday loans are not legal in every state.

Installment loans

These loans are for larger amounts and for longer terms than payday loans. Loan amounts typically run from $1,000 to $10,000 and terms can be from 3 to 18 months. The payments made to this type of loan are made in installments, hence the name. While installment loans have come to be associated with bad credit borrowers, they can be taken out by those with good or bad credit and are available from banks, standalone lenders or credit unions.
Find out the regulations for payday loans in your state

The key differences

The typical borrower

Payday loans

While every borrower differs, the flexible eligibility criteria attracts borrowers that:

  • Have bad credit or no credit history
  • Lower-income earners
  • Have no bank accounts if they are applying in-branch or at check cashing stores
  • Need small loans with a quick turnaround

Installment loans

As with payday loans, there is no “typical” borrower with an installment loan. Borrowers can:

  • Have good credit or bad credit, with lenders catering to both
  • Be looking to borrow a larger amount and pay off the loan over time
  • Want to take out a secured or unsecured loan

Loan amount and terms

Payday loans

  • Loan terms and maximum amounts are regulated at a state level
  • You can usually borrow between $50 and $1,000
  • Terms are normally offered between 7 and 60 days

Installment loans

  • This varies greatly between lenders. You can borrow anywhere between $1,000 and $100,000 depending on the lender and your eligibility
  • You pay off the loan in installments over a term of between 6 and 60 months (5 years)

How much it will cost

Payday loans

  • Payday loans are notoriously costly. Typical APRs reach into the hundredth percentile, but what you will actually pay depends on what state you live in. Remember that payday loans are lent over the short-term, so while APRs are a good representative cost of the loan, you will not pay back that full cost over a year.
  • If you cannot pay off the loan within the terms provided, it could lead to refinancing or rolling over the remaining amount. Doing so can incur extra fees and charges.

Installment loans

  • Installment loans vary greatly in costs. How much you will pay depends on how good your credit score is, whether the loan is secured or unsecured, what lender you applied with, among other factors. Some lenders will let you get a rate estimate before you apply without it affecting your credit score.

Lenders offering the loans

Payday loans

Weighing up all your loan options is important before applying for any type of credit. Are payday loans or installment loans the better bet? It depends on what you need.

Compare payday and installment loan providers

Updated August 18th, 2019
Name Product Filter Values Max. Loan Amount Turnaround Time Requirements
$5,000
1 business day
Direct deposit, meet minimum income requirements
Comes with the option to change your due date so you won’t fall behind on repayments.
$35,000
As soon as the next business day
Regular source of income, verifiable bank account, US citizen, ages 18+
Get connected with multiple lenders you might qualify with — even if you have bad credit.
$2,600
1 to 2 business days
Active checking account, regular source of income, email address
Get access to tools to help you plan a career move, make some extra cash or search for a better-paying job.
Varies by state
1 business day
Regular source of income, bank account, US citizen or permanent resident, ages 18+
Sign up for its discount program to get access to coupons and deals on everything from dining out to tax services.
$15,000
1 business day
$1,000+ monthly income, direct deposit, US citizen or permanent resident, ages 18+
Get offers from potential lenders in minutes by filling out just one online form.
$10,000
As early as 1 business day
$1,000+ monthly income after taxes, valid checking account
Explore its online education center to get tips on budgeting, how to prioritize your bills and more.
$50,000
1 business day
Employed, $800+ regular monthly income, checking account, ages 18+, US citizen
Fill out a simple online form to compare offers from several lenders that may be able to help.
$250
As soon as the next business day
Checking account with ACH, proof of income, Social Security number, ages 18+
Get rewarded for making on-time repayments with better rates and terms on future loans.
$1,000
1 to 2 business days
Bank account, email address, phone number, US citizen or permanent resident, ages 21+
Plus, get access to check cashing, cell phone top ups, bill pay and more at one of its many storefronts.

Compare up to 4 providers

Updated August 18th, 2019
Name Product Filter Values Max. Loan Amount Turnaround Time Requirements
$5,000
1 business day
Direct deposit, meet minimum income requirements
Comes with the option to change your due date so you won’t fall behind on repayments.
$2,600
1 to 2 business days
Active checking account, regular source of income, email address
Get access to tools to help you plan a career move, make some extra cash or search for a better-paying job.
$35,000
As soon as the next business day
Regular source of income, verifiable bank account, US citizen, ages 18+
Get connected with multiple lenders you might qualify with — even if you have bad credit.
$50,000
1 business day
Must be employed and receive regular income, earn at least $800 a month, have a checking account and be an 18+ years old legal US citizen.
Get a flexible installment loan with fast funding through one easy online application form.
$3,000
1 business day
Checking account, $1,500+ monthly income, recent pay stub, live in eligible state, 18+ years old
Financing with transparent terms to residents of five states.
$15,000
1 business day
$1,000+ monthly income, direct deposit, US citizen or permanent resident, ages 18+
Get offers from potential lenders in minutes by filling out just one online form.
$10,000
As early as 1 business day
$1,000+ monthly income after taxes, valid checking account
Explore its online education center to get tips on budgeting, how to prioritize your bills and more.
Varies by state
1 business day
Regular source of income, bank account, US citizen or permanent resident, ages 18+
Sign up for its discount program to get access to coupons and deals on everything from dining out to tax services.

Compare up to 4 providers

Are payday loans available in my state?

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US Payday Loans Offers

Important Information*
Logo for CashNetUSA Loan
CashNetUSA Loan

Apply for a short-term loan with an easy online application and dedicated customer service.

Logo for Check into Cash Payday Loan
Check into Cash Payday Loan

With 1,000 branches in 30 states, get $50 to $1,000 in days from this direct lender.

Logo for OppLoans Installment Loans
OppLoans Installment Loans

Installment loans with competitive rates from a top-rated direct lender.

Logo for LendYou Short-term Loans
LendYou Short-term Loans

Apply online with this loan-connection service offering unrestricted short-term loans with fast turnaround.

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2 Responses

  1. Default Gravatar
    SabrinaSeptember 20, 2017

    I’m trying to figure out what’s better to do, a payday loan or installment loan? I need a few extra money for rent I’m short about 230 dollars. What is my best option? I know I can’t pay it back all at once and I’m trying to pay back little as possible.

    • Default Gravatar
      JonathanSeptember 21, 2017

      Hello Sabrina,

      Thank you for your inquiry.

      Generally, payday loans or also known as short-term loans payment terms is 2 weeks to one month. Looking at your repayment preference, it may be more advisable to have an installment loan.

      Installment loans can have repayment plans between 6 months to 5 years. Kindly select your state of residence prior choosing your lender as availability depends on certain locations.

      It is worth mentioning to review the eligibility requirements and loan terms prior applying. Should you find the rates high, your alternative could be credit cards, as long as you have good credit.

      Hope this helps.

      Cheers,
      Jonathan

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