Though both Installment Loans Online and payday loans are convenient and beneficial, choosing one is not easy to make the right choice will usually depend on your requirements and other factors. If you want to choose one, it is better to understand the difference between the two. This would help you to plan in a better way and manage the funds properly.
These are four main determining factors:
What type of loan is it?
Both are short-term loans, aside from this what you need to check is whether they are secured loans or unsecured ones. A secured loan is a loan in which the borrower would pledge collateral for its amount. On the other hand, an unsecured loan does not need collateral in return for the loan amount that is given. The benefit of having a secured loan is that it involves less risk. Installment loans could be both secured or unsecured types. Getting a secured loan would offer a higher loan amount with a lesser interest rate; whereas, an unsecured one is a small amount with higher interest rates. On the other hand, Payday Loans are only unsecured ones. You do not require collateral for this, in this case, the loan amount is lower, and interest rates are higher.
What amount is involved in the loan?
The determining factor is which type of loan you would like to apply for is the maximum sum you can borrow. In the case of monthly installments, the loan amounts that get approved depends upon the amount you are applying for and your ability to pay it back. Some documents decide your repaying capacity, and they are Authentic ID, Social Security Card, Pay Slip or Pay Stub, Billing statement, and Collateral Documents. These documents can boost the chance of getting a high loan amount. Also, the other advantage is that it is easy to get this loan. While, in Payday loans, if you don’t want to get into unnecessary debts, then you can borrow an amount of loan that is not larger than your portion of the next pay. It also asks for a complete payoff, including fees, and interest on the next payday, and it is essential to pay the fees, and interest only to owe the same total sum next payday.
Monthly Instalment loans have to be prepaid based on per month over a fixed period. There is a time limit to repay the loan over a minimum period that is two months. The maximum time limit is 12 months. Also, there is no penalty if you want to pay the amount soon. While in Payday Loans, the repayment automatically takes place on the next salary pay-out. If you missed the entire amount of the loan, you would be charged all fees along with interest to owe a similar amount the next day. In the case of monthly installments, the balance gets decreased as you make the payment with no additional charges or interest related to on-time payment.
The process of Application:
Applying monthly installment loan requests for the requirement of a secure source of income, a residence, and there should be no existing unpaid loan amounts. The other documents that are given as evidence for your eligibility are; valid ID, recent payslip, employment details, bill statement, and contact details of the references. For Payday loans you need to provide the following documents: Valid ID, Proof of residence, payslip, or pay stub.
Monthly loans are better than payday loans as they can help you get a high loan amount; it also gives the advantage to pay off the loan in small portions, and it makes that quite affordable with installments over a fixed period.