You can use an Installment Loan as a Payday Loan

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A short term Installment Loan is really a flexible payday loan over an agreed number of months.

PayDay Loans versus Instalment Loans

In the short term loans market there are several lending options available to consumers. Fundamentally a short term loan should provide a solution to a temporary monetary requirement on the part of the consumer. Often such funds need to be easily accessible in a relatively short period of time; the need often arising due to an unforeseen event on the consumers part. In terms of the type of loans available within this sector they predominately fall into two categories; 1 Month PayDay Loans and Instalment Loans.

PayDay Loans have been in existence for several years now and are now familiar to consumers on a large scale. A PayDay loan will allow the consumer to borrow up to £1000.00 until their next employment pay date; typically a PayDay loan is likely to be in the region of £300.00. Once borrowed the funds are contracted to be repaid on an agreed date with interest applicable. The rate of repayment will vary from lender to lender relative to the actual amount borrowed. Generally the repayment period of a PayDay loan states repayment must be made on the consumer’s next employment pay date. Some lenders allow consumers to simply nominate a date of repayment, suitable to them and not related to the date the employer submits funds into the account.

In instances where a consumer is unable to make the contracted one-off repayment to satisfy a PayDay loan there may bethe option to extend the payment. An extension means the consumer can repay the interest applicable on the loan on the due date and extend the full repayment amount to the subsequent pay date. In such instances there will be another interest amount applied and therefore the repayment in full amount mirrors that amount which was originally due. An extension will not reduce the amount due and repayment in full is still due as described. Since July 2014 the regulator has also placed caps on the number of extensions that can be granted.

An Installment Loan differs from a 1 month PayDay Loan discussed above in that the repayment terms available are more flexible. Installment Loan providers will offer a choice of repayment terms to the consumer at the point of the application. Typically an instalment Loan provider will offer instalments over 3 months up to a year and depending on the consumer’s personal preferences, they can select the most appropriate term. Unlike PayDay Loans an instalment Loan allows the consumer to reduce the repayment amount to a level they deem fit and this can then be done by selecting the most suitable repayment term. Like PayDay Loans Instalment Loan providers can offer funds up to £1000.00 but typically are in the region of £300.00. Due to the extended repayment periods customers can elect to repay teh loan early and as interest is added daily, doing this will save money. It should also be considered when choosing your repayment term that the longer you borrow, the more the overall loan will cost.


Payday loans versus instalment loans

When it comes to getting out of a short-term financial situation, knowing that there are options available to you will always be a great comfort to you. You should always look to explore your options because it may be that you have savings or a family member or friend who will be able to provide you with the cash to get over any shortfall you may experience. In a situation where you need money fast, these are likely to be the best options. However, there will be times when you don’t have these solutions to turn to and this is where you need to consider taking out a loan.

In recent times, there has been a lot of talk about single repayment payday loans and how they can provide a quick solution to short-term financial problems. Payday loans are not without their critics but when it comes to getting money fast, many people find that they are an excellent solution. It would be wrong to think of them as the only solution though and this is where you may want to think about instalment loans. Instalment loans are an alternative to payday loans and for some people; they may provide a better solution.


What type of loan is best for you?

This means you need to look at different criteria when it comes to choosing between of these loan types and this is where the focus will fall upon the repayment of the loan.

A payday loan is usually paid back within a short time scale, usually within 14 to 30 days. The amount of money is traditionally paid back in a lump sum, within one payday period.

An instalment loan is usually paid back over a longer time scale, normally at 3 month, 6 month or 12 month intervals, or somewhere in between. The amount of money is paid in equal instalments once a month over the agreed loan period.

You will normally end up paying more in total with an instalment loan but it provides a degree of flexibility that most people will be more than happy with. This is where this style of loan can become the obvious choice for people looking to obtain a loan and then pay it back in a comfortable manner. Most reputable instalment loan providers will not charge any additional fees or interest for loans that are paid back early, so there is a greater degree of flexibility involved. Opting for a loan that is paid in instalments will give people a greater level of confidence and if they do have the funds to be able to pay the loan back quicker, they will be able to do so with no additional penalty to them.

The fact that there are two short-term loan types to choose from is great news for people. When it comes to looking after finances, there is a need to have options and the more options you have at your disposal, the better. There will be times when a payday loan meets your needs and there will be times when an instalment loan will be what suits your needs best. This is where being able to shop around and find the option that is best for you is going to help people make more of their opportunities.


By Kieran Moulden