Even for the most responsible spenders, there are times when people find themselves in a tough spot financially. With the rising costs of food, fuel, utilities and rent, it is no wonder many people are looking for a quick loan to help them get through the rough times. If someone does not have the best credit score, they may find that the bank will turn them down for even the smallest loan offered.
With many loan options that do not require collateral, such as credit card advances, payday loans and installment loans, people tend to get confused as to which is the best option. Because not everyone may have a credit card, let’s examine two most available types of collateral-free cash loans: payday loans and installment loans.
Payday Loans – No Collateral, Quick Maturation
A payday loan may seem like the logical answer to many when in need of fast cash. This type of lending option may not require a credit or background check, does not require collateral, can be applied for online or in person, and provides funding quickly. However, payday loans have very short loan term durations that require the entire amount paid back in full using the next paycheck. This is often within just two weeks. Oftentimes, borrowers find that paying back their loan amount leaves them with very little cash flow to handle their regular expenses until their next paycheck. A payday loan may be rolled over if the amount cannot be paid back on time, but this typically incurs additional fees. People who take out payday loans often fall into a cycle of debt from needing to roll over their loan repayments and constantly incurring more fees.
Installment Loans – Unsecured, Flexible Repayment
The ability to repay debt alongside the regular costs of living is an important factor to take into account when considering a loan. For this reason, borrowers who might not be able to pay a loan back in full may want to consider installment loans. Like payday loans, installment loans can provide needed funding without requiring collateral. As opposed to payday loans, however, installment loans have more flexible repayment terms. Rather than paying back the loan in full, repayment is broken down into installments. This means that borrowers can stay current on their loan repayment, and still have cash to cover necessary expenses such as bills, gas, or groceries.
Borrowers who need a few hundred to over a thousand dollars, but who do not have collateral to put up to secure a traditional loan, may want to consider an installment loan over a payday loan if immediate repayment does not sound feasible. Installment loans allow borrowers to repay borrowed funds over time, avoiding the stress that can come from having limited cash flow as a result of paying off a payday loan. As with all short term financial solutions, borrowers should consider their need and ability to keep up with repayment schedules before signing a loan agreement.
The content on this site is for informational purposes only and is not professional financial advice. Blue Trust Loans does not assume responsibility for advice given. All advice should be weighed against your own abilities and circumstances and applied accordingly. It is up to the reader to determine if advice is safe and suitable for their own situation.