When facing a financial emergency, you may need to take out a loan. There are different types of loans to choose from. However, the two most common loan types usually considered are payday loans and personal installment loans.
Here is a guide explaining the basics of payday loans and installment loans to help you decide which loan option best suits your needs.
The Basics of Installment Loans
There are different types of installment loans including consolidated loans, mortgages, auto loans, and more. However, personal loans are the most commonly requested installment loan.
Personal loans do not require any collateral as they are unsecured loans. Auto loans and mortgages use your vehicle and house as collaterals. However, a personal loan is not secured by collateral. Consumers who need additional funds for emergency medical bills or home and car repairs usually take out a personal installment loan. Also, they may use personal loans to consolidate their existing debt.
Here are the pros and cons of a personal installment loan to help you decide whether it is the right option for you.
- May be less expensive
- Lower APRs
- Longer repayment terms
- Qualified borrowers can take out larger loans
- Requires a long time for loan approval
- Good personal financial history required
- Auto repossession, bankruptcy, and foreclosure may prevent getting an installment loan
The Basics of Payday Loans
Payday loans are similar to unsecured installment loans because they do not require any collateral. You can also receive a small sum of money that has to be repaid within 2 to 4 weeks or at your next pay date.
Payday loans are the best choice for consumers who require immediate cash to solve their financial emergencies. Online payday loans are processed faster than traditional installment loans. They do not require checking your personal financial history.
Whenever You Need Immediate Funds, a Payday Loan Is an Excellent Choice!
You can take out installment loans only if you do not require quick cash and have a good personal financial history. An installment loan will never provide immediate access to funds, so it won’t be useful when you need cash for an emergency.
On the other hand, payday loans provide immediate access to cash when you need it for a financial emergency. All you have to do is to fill a loan request form online and submit it to your lender. Once approved, you can receive funds directly into your checking account by the next business day.