What Is a Payday Loan?
Payday loans are small, short-term loans—usually between $100 and $1,000—that you repay in full by your next payday. They come with high fees and typically must be paid back within 2 to 4 weeks.
Payday Loans vs Installment Loans: What's the Difference in 2025?
Choosing between a payday loan and an installment loan? You’re not alone. These two short-term lending options offer very different terms, costs, and repayment structures. Let’s break down the key differences so you can make the best choice for your situation.
What Is an Installment Loan?
Installment loans let you borrow a larger sum and pay it back over several months in fixed monthly payments. Repayment periods usually range from 3 to 24 months, giving you more time and flexibility.
Key Differences at a Glance
- Repayment: Payday loans require a lump sum payment; installment loans allow multiple payments over time.
- Loan Amount: Payday loans are generally smaller; installment loans can be larger.
- Duration: Payday loans last 2–4 weeks; installment loans can last up to 24 months.
- Interest Rates: Payday loans have very high APRs; installment loans typically have lower rates.
- Credit Impact: Installment loans are more likely to report to credit bureaus and help build credit.
Which Loan Is Right for You?
- Choose a payday loan if you need a quick, short-term fix and can repay the loan promptly.
- Opt for an installment loan if you want more time and structured payments to manage your finances better.
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Apply for a Loan Online NowFrequently Asked Questions
- What fees are typical for payday loans?
- Payday loans often have very high fees and APRs that can exceed 300%, so it’s important to understand all costs before borrowing.
- How do installment loans affect credit?
- Installment loans usually report to credit bureaus, which can help build or improve your credit score if payments are made on time.
- Can I refinance a payday loan into an installment loan?
- Some lenders offer refinancing options, but terms and availability vary. Refinancing can help by spreading payments over time with lower interest.
- What happens if I can’t repay a payday loan on time?
- Missing repayment deadlines can lead to additional fees, collection actions, and damage to your credit. Contact your lender promptly if you face difficulties.
- Are installment loans available for bad credit?
- Yes, some installment lenders specialize in loans for borrowers with bad credit, but expect higher interest rates and stricter terms.