Payday loans and installment loans are both loans which provide consumers with a small amount of loan when they are in need of it urgently. Most of the lenders that provide one form also provide the other. Let’s understand what each of these separately.

Installment loans, in general, can be best defined as a loan with a set number of scheduled payments. The amount of money offered can be higher or lower depending on the request of the consumer and other financial checks. These scheduled payments have fixed dates and amount and recover the principal and the interest together. The term for installment loans can be different based on the type of loan, it can be as little as few months or as long as 30 years. These are considered as safer options to payday loans and loans taken on credit cards.

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Some of the payday lenders offer installment loans which are similar to payday loans in terms or principal and interest rates, however, have installment repayment plans worked out. Installment loans are payday loans with larger amounts and longer terms.

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In Payday loans the borrower takes a loan from a lender, the principal amount of the loan is usually a percentage of the salary of the borrower. The lender offers this amount at a high rate of interest and short tenure.

Due to the high rates of interests online payday loans for bad credit are considered as an expensive option.

• Principal Amount – The principal amount in a payday loan is smaller than the traditional loans. It is usually a percentage of the borrower’s salary, however, all the states have their set of regulations placed on the maximum amount that can be loaned to a borrower.
• Interest rates – The interest rates on a payday loan are very high as compared to the other loans. On an average, an interest of around 15% can be charged weekly on the loan amount. The APR on these loans can go as high as 700%, due to which many states have put regulations and caps on the interest rates or other finance charges a lender is allowed to charge.
• Tenure – As these are short-term loans, the tenure can vary anywhere between 2 weeks to 4 weeks. States have defined their regulations on tenure as well where they may have defined the maximum period for which lending can be done. At the end of the tenure is the due date where a borrower must pay back the entire loan amount and fees to the lender.
• Repayment Plan – Most of the states have defined regulations regarding repayment plans, which come into action if a borrower is unable to pay back the amount on the due date the lender can extract the money in installments from them.
• Rollovers – Rollovers are the option to extend your loan in case that you are unable to pay back on the due date. Lenders may or may not offer this to the consumers. The lenders who offer rollovers most of the times will have a finance charge attached to it. All states do not allow rollovers. The states that do allow rollovers will have some form of rules to be followed to ensure the protection of consumers.

What you may need for qualifying for one of these loans:

• Above 18 years of age.
• Have a verifiable income.
• Government-issued ID.
• An Active checking account.

Above conditions may differ from lender to lender. As a consumer, you must always check the legal status of these loans in your states and select lenders which are licensed as per the rules defined for your state.

Payday loans or installment loans seem like an easy way out in case of an emergency, however, they are a very costly option to fix temporary financial problems. Consumers should try and find alternative sources to get money before deciding to take these out.