If you need some cash to cover an unexpected expense, you may be considering an online payday loan. But even if you have bad credit, an installment loan is still a much less expensive option.
Why should you try to get an installment loan for bad credit rather than a payday loan? Here are just a few of the best reasons.
- Bad Credit Installment Loans Can Help You Build Credit
This is one of the most important reasons to choose a bad credit installment loan. Payday loans are usually not reported to the major credit bureaus – even if you pay them on time, they won’t help you repair credit.
Bad credit installment loans from a bank or online lender will always be reported to credit agencies. That means if you take out a reasonable loan and repay it on time, you may be able to build up your credit score – so you’ll pay less in interest and fees in the future!
- Payday Loans Have Much Higher Interest Rates
A payday loan should only ever be your last resort if you need an emergency loan. This is because they typically have service charges of about $30 for every $100 you borrow. That means the APR (annual percentage rate) of a payday loan can be 300% or higher.
In contrast, installment loans for bad credit have an interest rate that’s usually capped at 30% – and most people will qualify for a lower rate, or can find a lower rate by shopping around at multiple lenders.
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On May 9th, 2019, The Hill released an article that highlights a bill that was presented by Representative Alexandria Ocasio-Cortez of New York and Senator Bernie Sanders of Vermont, aiming to put a cap on interest rates for consumer loans at 15%.
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- You Can Borrow More Money And Repay Over A Longer Period
With a payday loan, you typically can only borrow $200-$1,000, and you have between 2-4 weeks to repay it, depending on the date of your next payday.
This is not the case with installment loans for bad credit. You can borrow much more – depending on your income level and credit score – and get loan terms of between 12 months to 5 years. This means you can borrow more money, and repay your loan more gradually over time.
- They Have Lower Late Fees & Costs
In most cases, if you have trouble making a monthly payment on a personal loan, you can contact your lender and work out a solution, and avoid high late fees and other penalties – and unless you don’t pay for months at a time, your loan likely won’t be sent to collections.
This is not true of payday loans. Payday lenders may charge you extremely high late fees and penalties – and if you don’t pay right away, your loan will be sent to collections quickly – which means you’ll be hassled by bill collectors, and your credit score may plunge even more.
Choose A Bad Credit Installment Loan Over A Payday Loan
Even if you have bad credit, you can usually find an installment loan that will offer you better terms, a longer repayment period, and lower interest compared to a payday loan – so explore your options for bad credit installment loans now, and get the cash you need.
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A pawnbroker is someone who specializes in procuring and trading items of value, perceived or actual, based on their importance and other factors. Pawnbrokers often deal in jewelry, memorabilia, weapons, historical documents, coins, and other valuable collectibles. They also frequently have musical instruments, as these items are great for resale and offer a lot of value to people selling them.
Loan sharks worry a lot of people, and while there may be good reason, popular culture and mainstream media have also set a lot of people up for an expectation that doesn’t really exist. Loan sharks are out there, all around the world, but they aren’t what you are probably thinking of—they’re just your run-of-the-mill predatory lenders who are trying to take advantage of desperate people who find themselves in a tight financial spot.
Loan sharks work in unique ways, but their biggest MO is fear and sheer force of will. Intimidation is how they get people to pay, and although it’s not quite like you see in the movies, it’s also not a nice practice, to say the least.
Usury is just the practice of lending money at “unreasonably high” interest rates, which is more commonly known today as predatory lenders.
Brian Allen has been helping people make smarter financial decisions for over 10 years. As the Editor-in-Chief for Goloans, Brian writes about sage financial advice, “how to” articles, and reviews about lenders and creditors.