Payday loans, short-term loans, instalment loans – when searching for types of short-term finance, you’ll find all of these terms and more. It can get a tad confusing. You might even hear the terms ‘payday loans’ and ‘instalment loans’ used interchangeably. In fact, the two are quite different.
Although they are both useful sources of finance, payday loans and instalment loans serve different purposes. Depending on your situation, one could be perfect for you, the other not so. So, to help you decide, here’s the key differences between payday loans and instalment loans.
What are the differences between payday loans and instalment loans?
If you take out a payday loan, you then pay it back at the end of the month – in other words, when you get paid. Payday loans are a popular form of short-term finance and are designed to help people pay for emergencies and essentials – such as a broken boiler or car repair.
Instalment loans are paid back in multiple payments over a set period of time, rather than in one lump sum, like payday loans. Wizzcash offers instalment loans between £200 and £1,000 in which principal and interest can be repaid in equal instalments over three months.
Key differences between payday loans and instalment loans
- Cash Advance – you would usually pay a payday loan back as soon as you get paid.
- Smaller – typically smaller amounts of cash are borrowed.
- Designed to ‘bridge the gap’ between running low on cash and getting paid.
- Larger – usually higher in value than payday loans.
- Spread out – you pay back in monthly instalments rather than all at once.
Which loan is right for me?
The choice between these 2 loan types will depend on what your circumstances are:
Opt for a payday loan if:
- You want to borrow a small amount.
- You’re in need of some cash for an emergency or essential repair.
- You’re confident you can pay it all back when you get paid.
Opt for an instalment loan if:
- You want flexibility, paying back over a few months.
- You want to borrow a bit more than a payday loan.
As with any kind of finance, it’s crucial that you think very carefully before applying for a loan, whether it’s a payday loan or an instalment loan. Taking out finance is a big commitment, so always make sure you’re confident you can manage the repayment. As a responsible lender, Wizzcash will perform a number of credit and identity checks and only lend money to someone we think is able to pay back. Wizzcash are also approved by the Financial Conduct Authority and are a direct lender and broker.
Generic advice is not a service regulated by the Financial Conduct Authority.