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.”

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