The Holiday Borrowing Risk List
While payday loans are more likely to create frightening debt traps for unassuming consumers, there is another solution. Personal installment loans—they’re safer, more affordable and can help borrowers build credit instead of damage it. One main difference is that installment loans can be repaid through regular, scheduled payments spread across multiple smaller installments. Payday loans are repaid in a single lump sum that most borrowers can’t afford, entrapping them in an endless cycle of debt.
Installment loans eliminate the unpredictable nature of borrowing because they are often amortizing, which means every payment will address a portion of both the principal and the interest. Borrowers know exactly when their loan will be repaid and the amount they pay each month will never change. With longer terms and lower rates, installment loans help to ease the financial distress of having to pay back a loan while also taking care of basic living expenses.
The real difference between payday loans and installment loans? Installment loans are meant to be repaid and payday loans are not.