Payday loans and installment loans seem like two sides to the same coin. In some ways, this is true. But, installment loans are far more forgiving and far more inclined to favor the borrower over the lender based on how they are constructed.
Payday loans are good for one specific kind of scenario. It is a scenario where a borrower needs a lump-sum for an emergency, and they will have the money, and plenty to spare, by the end of the month. It is a transition to get to the big payment around the corner where the loan can be blissfully paid off and things can continue as normal. There are not a lot of imaginary or real scenarios where this would be the case. Potentially an auto repair (combined with a new job offer). The reality is that payday loans require a lump-sum payment in a short period of time, and non-payment results in sometimes catastrophic mounting fees.
The Main Differences
Installment loans have many of the same characteristics as payday loans with one huge exception. Borrowers can pay the loan in pieces. Instead of opting for a big payment after payday, borrowers can receive the payments in pieces. Better yet, loans with companies like BlueTrustLoans.com, are fixed. They will remain so for the whole duration of the loan. This allows borrowers to easily accommodate the loan into their new budget.
Payday Loans and Extensions
Payday loans can’t be paid early. Installment loans can. Payday loans require a big single payment where extensions can be requested. Installments have no such thing. A payday loan extension is basically “bought” with a big fee. Borrowers can turn a payday loan into an installment loan, of sorts, by just paying exorbitant fees for each month the total is not paid.
If payday loans require borrowers to “pay” for extensions, installment loans already have them built into the loan. Further, borrowers do not have to pay for any kind of extension with extraneous and bloated fees.
The payday loan system was not designed to last as people caught on to how spe[cific of a type of borrowing it is. It should be reserved for rare cases. Installment plans, though not without their flaws, are designed better for a borrower in need.