There are many things that happen in life that we do not expect. These unforeseen situations can cause a tremendous strain on your personal life as well as on your finances. In times like these, it is good to have a savings account or some access to funds to meet these challenges.
Unfortunately, many people do not have access to these types of funds and some feel embarrassed asking family and friends. This is where a Payday Loan or an Installment Loan can help bridge that gap.
A lot of times these two loan products are often put together in the same category simply because they have a higher than normal rate of interest and the criteria to get one of these loans is lower than a traditional loan. But what are they? How are they different? Which one is right for you?
Payday Loans
In Ontario, a payday loan or cash advance loan is a high-risk loan that meets certain basic requirements. It is considered high risk because the applicant does not need to submit a credit check in order to qualify.
As the name suggests, this type of loan is dependent on a person’s income. Payday Loans or cash advance loans are loans that are due on the borrower’s next payday. In Ontario, payday loans can not exceed $1,500 or 50% of the borrower’s net pay (pay after taxes).
The maximum amount that can be charged on a payday loan is $15.00 for every $100.00 that is borrowed and the loan must be repaid in full on their very next payday. Because of the quick approval and quick repayment time, this to some is the perfect solution to their short-term financial problem.
Installment Loans
An installment loan is similar to a Payday Loan in that the requirements are less than that of a traditional bank loan. However, there are differences between the two.
The three main differences between a Payday Loan or Cash Advance loan and an Installment loan is that an Installment Loan gives you more money, a lower interest rate, and more time to repay.
Unlike a Payday Loan that is capped at $1,500.00 or 50% of a borrower’s net pay, the maximum amount of an Installment Loan is determined by the Lender and the Borrower.
Also unlike a Payday Loan which must be repaid in full on the borrower’s very next payday, an installment loan gives you the freedom to repay in smaller installments scheduled over a longer period of time. This type of loan is typically useful for long-term problems or some sort of long-term illness where it is important to have more funds on hand.
However, since Installment loans offer higher sums of money and a longer-term to repay, many companies might require some sort of collateral in order to secure the loan. Another key advantage of an Installment Loan over a Payday is the interest being charged or the APR%.
With payday loans, typically if you were to calculate the APR depending on the jurisdiction, this amount could range from 200% – 400% on an annualized basis. Whereas with an Installment Loan, the most interest that can be charged is 60%.
However, keep in mind that some companies do charge other fees such as loan origination fees, broker fees, or credit insurance premiums that are included in your monthly installment payments.
Which is Right for You?
While both types of loans have their pros and cons, there is no right or wrong answer as to which loan is better as people’s financial situation will differ from person to person.
Therefore, it is always best for each person to thoroughly review their personal situation and make the best choice for them. At Simply Cash their goal is to offer the best alternative loan products and best customer-oriented service in the industry.
Their unique approach to an Installment Loan has allowed them to offer a more customer-friendly option to the traditional Installment Loan. At Simply Cash instead of using collateral to screen their customers, they simply use your repayment history with your Payday Loan.
Once you have repaid your loan several times, you will then be offered an opportunity to level up or upgrade your Payday Loan to an Installment Loan. Therefore, you will never need to do a credit check or and there will be no need to provide any type of collateral for any of their loans. Along with that, their Installment Loans are up to $2,500.00 with up to 1 year to repay.
In the end, the decision as to whether to choose a Payday Loan or an Installment Loan is ultimately yours. Luckily whichever product you choose Simply Cash will be there to work with you to ensure that you have the loan product to suit your current situation and a repayment plan that is feasible for you. You can visit one of their branches or apply online at www.simplycash.ca.