People who do not have access to most forms of credit but who need to borrow money may not be sure whether a payday loan is the right choice. They’ve probably heard about the high interest rates and the requirement to pay all the money back with the very next paycheck. An alternative is an installment loan from a company like Blue Trust Loans. Interest rates tend to be somewhat lower, although still higher than bank and credit union loans. In addition, the money can be paid back over several installments instead of all at once.
Payday Loan Purpose
Payday loans can be suitable when someone has an unexpected expense and no way to pay it between paychecks. The car might need a new water pump, for instance. It would be easy to pay the bill after getting paid, but it’s only Tuesday and payday isn’t until Friday. There’s no way to get to work without the car. In this case, the person could obtain a cash advance on Tuesday and repay the full amount on Friday.
When an Installment Loan May Be Better
Installment loans work better when someone needs to borrow an amount of money that would be very difficult to pay back with the next paycheck. Instead of a new water pump, the car might require major engine work, such as replacement of a fuel injector. With an installment loan, the consumer can pay the money back over six, nine or 12 payments.
Often, if a person brainstorms, he or she can figure out a different way to borrow an amount that might be acquired with a payday loan. This is harder when the expense is much higher. A friend or relative might be willing to lend $300 for a less expensive car repair, but fuel injector replacement might run $800 to more than $1,000.
The consumer typically is approved for a loan that is a low percentage of his or her income. That ensures this individual can make the payments as scheduled. Income normally must be verified by uploading a copy of a pay stub, although not all companies require this.