Life is full of unexpected surprises, many of which are surprise expenses! But not to fear, Moneytree has your back! Before you kiss your budget goodbye, consider some options that may work better for your wallet. A payday or installment loan is one simple way to handle the unexpected the next time you find yourself in a pinch. But first, it’s important to get all the facts up front so you can pick the product that best fits your “get-me-out-of-this-pickle now”needs. Today, we’re talking about payday vs. installment loans – what’s the difference?!
Think back to the last time you needed cash in hand for a big life event or unexpected expense. Perhaps your car started sputtering on the way to work (uh oh!), or you forgot your niece’s quiceañera and needed a gift ASAP. Whatever the reason, a quick cash loan can help you avoid any of life’s little hiccups. But, which loan will best fit your needs? Knowledge is power, so let’s get familiar with these two types of loan options and what they offer.
Apples, Oranges, and … Installment Loans? The differences between loan products:
Payday and installment loans can be compared to apples and oranges. Both types of fruit grow on (Money)trees, but each one tastes totally different, and each person picks their favorite! Both product options get you cash in hand, but each type is paid back differently. Which loan will work best for you depends on your budget, income, expenses, and how much money you need to borrow. Here’s the short and sweet (get it, like fruit?) on each loan option.
Payday loans
A payday loan allows you to take out a set sum of cash until your next paycheck. There is a flat, one-time charge, and the due date is designed to align with your income schedule (hence the name, payday loan).
Example: You’re $100 short on rent because your car needed repairs this month. You opt for a payday loan because you don’t want to be late on rent and end up with a late fee. By next payday, you’ll have the ability to pay back the loan in full, your rent is paid on time, and no bussing to work is needed – it’s a win-win situation!
Installment loans
Installment loans are designed to give you more time to pay back the lender, with a set schedule of smaller, spread out payments. Like a home mortgage or car payment, this loan type is paid back in bits and pieces, or pieces and bits, if that’s your thing.
Example: Your water heater is busted, and the idea of a cold shower just doesn’t sound appealing, brrrr!. Water heaters aren’t cheap, so you take out an installment loan to cover the cost so you’re not showering in the cold while you save up the money for a new one. You make your loan repayments over several months, making the cost more manageable. Hot showers and a healthy bank account – hooray!
So, the next time your car sputters to a stop, your cat Clementine catches a cold, or your family needs some extra cash flow, you’ll be more prepared to make the loan choice that’s right for you! Do you have a specific need in mind already (can’t forget about that quiceañera!)? Check out our website to find out whether a payday or installment loan is available in your state.
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