When money is tight and an unexpected bill shows up, two options often come up: installment loans and payday loans. Both can put cash in your hands quickly, but they are built very differently, and that difference can have a big effect on your budget.
How payday loans work
A payday loan, called a deferred deposit loan under Nevada law, is a small, short-term loan that is typically due in full on your next payday, often within a few weeks. Borrowers usually write a postdated check or authorize the lender to withdraw the full amount from their bank account on the due date.
Because the entire balance plus fees comes due at once, many borrowers find it hard to repay on time and end up extending or renewing the loan, which adds more cost.
How installment loans work
An installment loan gives you a set amount up front and lets you repay it over several months in equal, scheduled payments. Every payment chips away at the balance, so you finish on a known date.
Side by side
- Repayment: payday loans are usually due in one lump sum. Installment loans are repaid in smaller payments over months.
- Predictability: an installment loan with a fixed rate has the same payment every month.
- Loan size: payday loans are typically small. Installment loans can cover larger expenses.
- Cost: compare the APR. Payday loans often carry very high APRs because their fees are charged over a short period.
- Risk of rollover: a single lump-sum due date makes it easier to fall into a cycle of renewals.
Questions to ask before you borrow
- Is the lender licensed in Nevada?
- What is the APR, and what is the total of payments?
- Is there a penalty for paying early?
- What happens if I make a payment late?
For a closer look at how installment loans work, read What Is an Installment Loan and How Does It Work? Private Access Loans offers installment loans with fixed payments and no prepayment penalty. If you would like to talk through your options, call our Las Vegas office at 702-330-0458.
