Which is better, a payday loan or an installment loan? This question is about Personal Loans

An installment loan is better than a payday loan because installment loans have much lower fees, longer repayment periods, and larger loan amounts, and they can improve your credit score over time. Payday loans are predatory and often have fees equivalent to an APR of 400%+, so they should be avoided. For your convenience, below is a comparison of payday loans and installment loans. Payday Loans vs. Installment Loans Category Payday Loans Installment Loans Loan Amounts $500 or less usually $250 - $100,000+ APRs 400%+ (charged as fees) 5.99% - 428% Fees Fees often equivalent to an APR of 400%+ 0% - 8% origination fee Late fee Closing fee (mortgages) Repayment Periods 2 - 4 weeks 3 months - 30 years Credit Score Requirement None 580+ (none in some cases) Effect on Credit Score Payments usually aren’t reported to credit bureaus Helps credit if payments are made on time Hurts credit if payments aren’t made on time Where to Get One Payday lenders, either in-person or online Banks, credit unions, online lenders If you think an installment loan is right for you, check out WalletHub’s picks for the best installment loans. Then, you can estimate your potential rates with our free pre-qualification tool.

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Which is better, a payday loan or an installment loan?

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This question is about Personal Loans

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Adam McCann, Financial Writer

@adam_mccann • 08/04/22 This answer was first published on 08/04/22. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

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An installment loan is better than a payday loan because installment loans have much lower fees, longer repayment periods, and larger loan amounts, and they can improve your credit score over time. Payday loans are predatory and often have fees equivalent to an APR of 400%+, so they should be avoided.

For your convenience, below is a comparison of payday loans and installment loans.

Payday Loans vs. Installment Loans

Category	Payday Loans	Installment Loans
Loan Amounts	$500 or less usually	$250 - $100,000+
APRs	400%+ (charged as fees)	5.99% - 428%
Fees	Fees often equivalent to an APR of 400%+	0% - 8% origination fee Late fee Closing fee (mortgages)
Repayment Periods	2 - 4 weeks	3 months - 30 years
Credit Score Requirement	None	580+ (none in some cases)
Effect on Credit Score	Payments usually aren’t reported to credit bureaus	Helps credit if payments are made on time Hurts credit if payments aren’t made on time
Where to Get One	Payday lenders, either in-person or online	Banks, credit unions, online lenders

If you think an installment loan is right for you, check out WalletHub’s picks for the best installment loans. Then, you can estimate your potential rates with our free pre-qualification tool.

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Is an installment loan a good idea?

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