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Compare payday loans and installment loans

Find out which option is right for you

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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.

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

Data indicated here is updated regularly
Name Product Filter Values Max. Loan Amount Turnaround time Requirements
Fast5kLoans Short-term Loans Connection Service
$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.
Check Into Cash Payday Loan
$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.
OppLoans Installment Loans
$5,000
1 business day
Direct deposit, meet minimum income requirements, live in eligible state
Comes with the option to change your due date so you won’t fall behind on repayments.
LendYou Short-term Loans
$15,000
Same business day to 1 business days
$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.
Possible Finance Mobile Installment Loans
$500
As fast as 1 business day
Checking account with 3+ months of banking history, $750+ monthly income, live in eligible state, ages 18+
Borrow up to $500 with just a few swipes — but only for residents of 5 states.
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Data indicated here is updated regularly
Name Product Filter Values Max. Loan Amount Turnaround time Requirements
Fast5kLoans Short-term Loans Connection Service
$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.
 Check Into Cash Installment Loans
$3,000
1 to 2 business days
Bank account, email address, phone number, US citizen or permanent resident, ages 21+, $3,500 minimum income in California
Borrow money with lower payments and more time to pay than a traditional payday loan.
OppLoans Installment Loans
$5,000
1 business day
Direct deposit, meet minimum income requirements, live in eligible state
Comes with the option to change your due date so you won’t fall behind on repayments.
LendYou Short-term Loans
$15,000
Same business day to 1 business days
$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.
Possible Finance Mobile Installment Loans
$500
As fast as 1 business day
Checking account with 3+ months of banking history, $750+ monthly income, live in eligible state, ages 18+
Borrow up to $500 with just a few swipes — but only for residents of 5 states.
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Compare up to 4 providers

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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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