Category: Installment Loans


Installment Loans vs Payday Loans. What’s the Difference?

Installment Loans vs Payday Loans. What’s the Difference?

I get at least one call every day along the lines of, “What’s the difference between a payday loan and an installment loan.”

They say a picture is worth a thousand words so here you go.

Typical Installment Loan Breakout from Page 248 of our “How to Start a Personal Loan Business:”

Consumers borrow between $300 and $1,200.

The standard repayment schedule for installment loans offered is 20 payments over the course of 10 months, with one payment made every two weeks.

For each installment payment, a consumer must pay a “service fee” (often $30 for every $100 of principal outstanding) and five percent of the original principal.

As a result, lenders typically offer loans with annual percentage rates of between approximately 440% and 950%.

For an $800 loan, a typical loan contract requires the consumer to repay a total of approximately $3,320 over the course of ten months.

The following excerpt is from a typical loan document prepared for an installment loan in the amount of $800 originated by a lender and made to a borrower:

NOTE: For an in depth discussion and sample docs and contracts, visit PaydayLoanUniversity

Installment Loan vs Payday Loan

Installment Loan vs Payday Loan from “How to Start a Payday Loan/Installment Biz.”


Installment Loan Profits: The Business of Installment Loans

Installment Loan Profits

An installment loan business offers tremendous opportunity BUT there are caveats. The first is the implementation of the 36% APR that many consumer advocates propose.

A $500 installment loan for a period of six months at a 36 percent APR produces total revenue of $53.79; just under $9 per month. If just one loan in a portfolio of these installment loans default, the installment loan lender must make ten “good” loans to recover their loan principal on the one bad loan, without considering operating costs on any of the installment loans in their portfolio.

installment loan business

To the tune of “Everything’s gonna be alright.”

The installment loan lender still requires enough revenue to justify obtaining and maintaining the lending location or internet platform, customer acquisition costs, hiring and paying their installment loan employees, acquiring the supplies and equipment required to run an installment loan business, the costs of maintaining ACH, loan management and Image Cash Letter (ICL) vendor relationships, securing a dependable bank account and all its attendant costs, and complying with the regulations both at the state, FED and or Tribal level.

A DAUNTING TASK, 36%? I Guess the so-called consumer advocates whose agenda is <36% APR’s would like to see installment lenders make it up with volume 🙂