Which is better Installment Loan or Payday Loans – Know it in Detail

Credit

Most of the time people may get into financial trouble. The payment bound can push them to make hasty decisions. During these types of hard times, they blindly opt for payday loan as a quick fix. Often people do not realize that this will create trouble in the near future.

What is a payday loan?

The common definition about this loan is that “obtained under agreeable terms and conditions to be paid off within 14 days or within 31 days”. You can also term it as a postdated check. So basically, no matter whatever the amount is you have to pay within 31 days. Moreover, the amount will have to be paid along with the interest rate.

Most of the people assume that they can pay off their pay day loan without calculating their budget and income. A lump sum amount is obviously feasible for the people in terms of financial emergency but it is not easy to pay off.

Taking up a year to pay off the installment loan is easier than attempting to pay the unrealistic payday loan within the time of 31 days. Needless to say if you fail to fulfill the required amount you will be charged sky high interest rates. It is advised to understand and take steps accordingly.

Why installment loans?

An installment loan is granted with or without collateral. Here the borrower makes payment consistently to clear off the loan during the loan tenure. Most of the time installment loans are charged with lesser interest to that off pay day loans. There are two types of installment loans

Secured loans

In this type of loan, the lender will acquire some of your valuables like property papers, shares, stocks and bonds as security. This just acts a collateral amount. This can also reduce your interest rate on the principle amount. In case you fail to pay it the lender will seize the given assets.

Needless to say this is the best long term installment loans. This is realistic approach towards any high debt situation. Instead of getting desperate think about the long term pros and cons.

Unsecured loans

These types of installment loans are allowed to local and regional persons mostly. Since you cannot deposit any assets and it works entirely on trust, you need to have a reference. You can either take the help of your friend or family members.

Conclusion

You must be very careful about taking a loan. Make sure you completely understand the fine print and contractual papers. You must judge the obligations very carefully Otherwise you may have to pay extra money for misunderstanding.