Is A Payday Loan An Installment Loan Or Revolving Credit

If you ever asked “is a payday loan installment or revolving?”, it’s time to know the truth.

Payday loans are neither installment loans nor revolving credit. So, what type of credit is a payday loan? They occupy a unique category of short-term, high-cost loans with their own distinct structure and repayment terms.

Let’s explore the nature of payday loans and how they compare to installment and revolving credit options.

What Type of Credit is a Payday Loan

Payday loans are a specific type of short-term, high-cost loan, designed to be repaid in a single lump sum on the borrower’s next payday, typically within 2-4 weeks.

The key characteristics that define payday loans include:

• Short repayment term: Usually 2-4 weeks, until your next payday
• Lump sum repayment: The full loan amount plus fees is due all at once
• Small loan amounts: Typically $500 or less
• High fees: Often $10-$30 per $100 borrowed
• No credit check required: Approval is based on income and bank account verification
• Post-dated check or electronic access: Borrower provides authorization for automatic withdrawal on due date

Payday loans are designed as a short-term “bridge” to help cover emergency expenses until the borrower’s next paycheck. However, their high fees and short repayment terms often lead to a cycle of reborrowing.

Payday Loan vs Installment Loan

Installment loans are a type of credit where you borrow a lump sum and repay it in fixed, regular payments (or installments) over a set period. These loans can range from a few hundred dollars to tens of thousands, with repayment terms typically spanning several months to a few years.

Now you know what type of credit is a payday loan and how installment loans work. To better understand how payday loans differ from installment loans, let’s compare them directly.

Payday Loans

• Repaid in full on next payday (2-4 weeks)
• Typically $500 or less
• High fees (often 400% APR or more)
• No credit check required
• Do not build credit
• Risk of debt trap due to short repayment period

Installment Loans

• Repaid in fixed monthly payments over months or years
• Can be for larger amounts (up to $100,000+)
• Lower interest rates (typically 6-36% APR)
• Credit check and income verification required
• Can help build credit if reported to bureaus
• More manageable repayment structure

Here’s a comparison table to highlight the key differences:

As you can see, installment loans can offer some advantages over payday loans. Let’s compare both advantages.

It’s important to note that installment loans is a broad category. It includes many different types of credit, such as personal loans, car loans, and mortgages. Because of this, the terms and conditions can vary significantly.

Always explore all your options and carefully consider all the variations before taking out any loan.

Best Installment Loans Options

Now that we’ve covered what installment loans are, let’s talk about some of the leading providers in the US. Remember to always borrow responsibly and make sure you can afford the payments before taking out any loan.

BadCreditLoans.com

BadCreditLoans.com connects borrowers with a network of lenders offering loans from $500 to $10,000. The company has been in business since 1998, making it one of the oldest online loan marketplaces.

5kFunds

5kFunds offers loans ranging from $500 to $35,000 with flexible repayment terms. That’s one the reasons they have been chosen by over 81,000 borrowers.

OppLoans

OppLoans provides installment loans as an alternative to payday loans, with amounts from $500 to $4,000 and fast funding. Moreover, Opploans offers free financial education resources to help borrowers improve their financial health.

Upgrade

Upgrade offers personal loans from $1,000 to $50,000 with fixed rates and terms. They also offers a rewards checking account that can help you save money on your loan.

If those options are not the right choice for you, compare more lenders and their conditions with Financer Loan Finder. It’s a totally free tool that can help you save both time and money when searching for a credit.

Payday Loan vs Revolving

Let’s also break down the differences between payday loans and revolving credit. We’ve already covered payday loans, so let’s start with a quick explanation of revolving credit.

Revolving credit is a type of credit that allows you to borrow money up to a certain limit, repay it, and then borrow again.

The most common example is a credit card. You have a credit limit, and as long as you’re under that limit, you can keep using the card, paying off some or all of the balance each month.

Now, let’s compare these two types of credit:

Here’s an example to illustrate the difference:

Let’s say you need $300 for an emergency car repair.

With a payday loan, you might borrow $300 and owe $345 in two weeks (assuming a fee of $15 per $100). You must repay the full $345 on your next payday or risk additional fees and potential legal action.

With a credit card (revolving credit), you could charge the $300 repair. If you pay it off in full when the bill comes, you’d owe no interest. If you can only afford to pay $100, you’d carry a $200 balance and owe interest on that amount (let’s say $3 at 18% APR). You could then continue making payments over time.

For those with poor credit who might not qualify for traditional revolving credit, secured credit cards can be a good alternative. These require a cash deposit as collateral but can help you build credit over time.

Top Payday Loan Companies For Quick Cash

You started this reading questioning if is a payday loan installment or revolving and now you’ve got the lowdown on payday loans, installment loans, and revolving credit. But you’re probably wondering which option fits you best.

If you’ve decided that a payday loan is your best (or only) option, let’s look at some of the top payday loan companies out there.

BadCreditLoans.com

• Loan amount: $500 – $10,000
• APR: 5.99% to 35.99%
• Pros: 24/7 service, free to use
• Cons: Limited to $1,000 for very low credit scores

Wizzay.com

• Loan amount: $200 – $5,000
• APR: 5.99% to 35.99%
• Pros: Easy online application, quick approval
• Cons: Personal data may be sold to third parties

LowCreditFinance

• Loan amount: $100 – $50,000
• APR: 5.99% to 35.99%
• Pros: Fast funding (as quick as 60 minutes), accepts all credit types
• Cons: High APRs for those with poor credit

If you’re set on a payday loan, be sure to:

1. Borrow only what you absolutely need
2. Understand all fees and terms before signing
3. Have a solid plan to repay on time

Smarter Alternatives To Payday Loan

It’s well known that when you need cash fast, a payday loan can seem like a lifesaver. But there are smarter alternatives that won’t leave your wallet crying:

1. Personal Loans: These usually have much lower APRs than payday loans. Even if you have bad credit, some lenders specialize in loans for folks like you.
2. Credit Union Loans: Many credit unions offer payday alternative loans (PALs) with APRs capped at 28%. That’s way better than 400%!
3. Payment Plans: Many creditors will work with you if you’re struggling. It never hurts to ask!
4. Local Assistance Programs: Check out local non-profits or charities. They might offer emergency assistance.

Remember, no matter what type of credit you’re looking for, the best way to get a good deal is to shop around. That’s where Financer’s Loan Finder comes in handy. It’s a free tool that helps you compare lenders and find credit options with just a few clicks.

Always borrow responsibly. Make sure you can afford the payments and have a solid plan to pay it back on time.