The principal difference between payday loans and payday installment loans is obvious. The classic payday loan has to be repaid in full on the next pay date. The entire loan amount and the accrued interest will be deducted from the bank account on the payday, which cannot be more than thirty days from the date of approval and subsequent disbursal. Payday installment loans are repaid over a period of time. The repayment term can be ninety days, six months or even up to a year in some rare instances. This difference is evident and quite simple but the implications are not.
The Distinct Factors of Payday Installment Loans
Payday installment loans are similar to short term loans. The loan amount is still determined on the basis of income and hence eligibility. The repayment term is influenced partly by the preference of the borrower and rest by what a lender deems fit after assessing the profile of the applicant. Since there is an installment scheme at play, there are a few distinct factors and these pave the way for some possibilities that are not relevant in case of classic payday loans.
Depending on the repayment term, which is the period of time, and the clauses of the agreement, the rate of interest may be fixed or variable, there may or may not be a policy of auto renewal, the penalties may pile up for nonpayment of more than one installment and there can be other extra charges levied in such circumstances. These clauses should be mentioned in the contract. Borrowers should be aware of such clauses. Payday installment loans are easier to manage and repay compared to the onetime full repayment of the classic variant. But these distinct factors lead to certain implied possibilities that can cause financial problems for borrowers.