Did you know that almost two million Canadians take out payday loans each year? When it comes to getting cash quickly, payday loans are often people’s go-to solution. But what if there was another solution available? Are payday loans really the best way to go when you need money fast?
If you find yourself googling ‘payday loan near me’ or ‘payday loan vs installment loan’, then you’re in the right place. Sometimes it can be hard to know which option to take when you need money quickly. Or indeed, what the options even are.
Read on to find out the differences between payday loans and installment loans, and if one is a better choice than the other.
What is a Payday Loan?
A payday loan is a very small loan usually for no more than $1,000. They’re due to be repaid on your next payday (hence the name), and oftentimes, they require you to give access to your bank account (or write them a postdated check) so the lender can take the money.
There are two main issues with payday loans:
- The extremely high interest rates
- The fact that they don’t require credit checks
The problems tend to begin if and when the borrower is unable to pay the loan back. In this instance, lenders will typically allow for the loan to be rolled over to the next month, however not without more interest as well as late fees.
Due to the fact that payday loans do not require a credit check, it’s not uncommon for borrowers to find themselves in a position where they are unable to pay it back. With the extra interest and late fees added on, people can end up in an endless cycle of hurt where they are stuck.
General advice is this: don’t take out a payday loan. But is there another option when you need money quick? You’re in luck!
What is an Installment Loan?
“Installment loan” is a broad term that covers mortgages, car loans, and much more. The shorter term loans that are comparable to payday loans are referred to as Personal Loans. Although the repayment time frame can vary, typically it is up to 12 months. Over the agreed months, you pay back the loan via a fixed payment each month.
Unlike a payday loan, installment loans do require a credit check, and there is also often a fairly lengthy application process. This commonly includes a list of people ineligible to apply such as those on social assistance or who are unemployed. But don’t let that put you off!
It is also the case that installment loans have a much better interest rate than payday loans, and they offer much higher amounts to borrow. Depending on the lender, it could be possible to borrow anywhere between $100 to $35,000.
Furthermore, because the monthly payments are fixed, there are no late or unexpected hidden fees meaning you know exactly what you’ll be paying each month when you take out the loan. While it seems like more hassle, it’s still a quick process that can be done online, and you’ll have access to the money almost instantly after making the application.
Payday Loan Vs. Installment Loan: Which is Better?
There definitely seems to be a general consensus on this question, and that is that installment loans are absolutely better than payday loans. Due to the high chance of accruing a mountain of debt, lawsuits, and bailiffs, payday loans are generally considered a loan that should be avoided at all costs.
It’s also not unheard of to hear of people going bankrupt over payday loans because of the massive build up of debt. You might only borrow $1,000, but if you keep putting off the payment, that number is going to rise rapidly and uncontrollably. Thus only making your situation worse.
Installment loans offer a much more stable option and take into account your financial situation. Unlike payday loans, lenders won’t take advantage of your low credit score, which although might seem unhelpful at the time if you get rejected, will inevitably be the right call down the line.
There are, of course, benefits of loans. They are not inherently bad concepts. However, it is vital that the one you choose is one that will work for you financially. The main focus when getting loans should be to help you, not make your financial situation worse.
With that in mind, if at all possible, choose the installment loan over the payday loan. You won’t regret it!
Get the Right Personal Loan For You
When choosing a payday loan vs installment loan, it’s very important to look around at your options. While payday loans might seem like the obvious choice for your situation, more often than not, an installment loan will be the safer and smarter option.
The key when taking out a loan is to help you, and lots of financiers agree that payday loans can actually do the opposite. In order to avoid falling into unmanageable debt with huge interest rates and late fees, make sure to evaluate the situation first.
Before making your decision, a great option is to contact a bank or financial service company for advice. These organizations have the knowledge and experience required to give you solid guidance on which is the best option for you.
If you’d like to know more or if you’d like to take out an installment loan, contact us today!
