Are Payday Loans Installment or Revolving Loans?

Is a Payday Loan an Installment or Revolving Loan?

Do you need cash to make ends meet until your next paycheck hits? Payday loans can be an option to consider if you don’t want to dip into your savings account. But are payday loans installment or revolving loans? The answer is neither.

Payday loans are expected to be repaid in one lump sum on your next paycheck. They can be a helpful financing option if you need fast cash and do not qualify for other forms of credit, such as unsecured personal loans. 

Before you start your search for fast funding, make sure to research all of your options. See if a payday loan or an installment loan is the right fit for your situation! Each type of credit comes with different loan terms, including varying interest rates and repayment schedules.

Revolving Vs. Installment Loans

Now that you understand that a payday loan is not an installment loan or revolving credit, you may want to dig deeper into how these types of loans work. 

What are Installment Loans?

Installment loans are disbursed in a lump sum and expected to be repaid in regular payments over a set period of time. These payments are known as monthly installments. 

That means if you are approved for an installment loan, you will receive all of your funds in a single payment. Typically, the most common way to receive your installment loan funds is through direct deposit to a bank account, but some lenders may be able to offer other options for getting your money. Installment loans can be amortized. This means that you will pay back both the principal and interest of the loan in regular, equal installments until the remaining balance of the loan is gone.

What is Revolving Credit?

Revolving credit is a broad term but the umbrella typically includes credit cards and lines of credit. With revolving credit, you are given a set amount of money to spend. This is called your credit limit.

The lower the amount of money you spend in relation to your limit, the lower your overall utilization is for a credit card or line of credit.

With revolving credit, you can continue to borrow and pay back as much money as you need. But, you can’t exceed the credit limit. It can be easier to fall into a debt spiral with revolving credit. This is because it isn’t a lump sum to pay back in regular installments.

Instead, you can make just the minimum payments on your balance each month. You don’t have to completely pay back what you owe each month. But if you don’t, it’s easy to become too reliant on your credit card and fall behind. 

What Type of Loan is a Payday Loan?

A payday loan is a type of unsecured loan. Unlike title loans and home equity loans, you aren’t required to offer collateral like a home or car to access the funds you need. But, you may be required to write the lender a post-dated check. Or, you need to give them permission to electronically debit your account on the due date for your payment. 

Payday loans are meant to be short-term loans. Often, payday loans can cater to borrowers who do not have strong credit.⁵

In most cases, you are expected to pay the loan in full on your next payday – hence the name! Payday loans can help you access funds when your paycheck just isn’t stretching as much as it used to. 

When to Choose Payday Loans vs. Installment Loans or Revolving Credit

The loan option you decide to pursue will depend on your financial situation, along with your needs and preferences. If you already have a credit card, you can apply for a cash advance with your card and access some of your available credit. Keep in mind that credit card cash advances may not have the same interest rate as regular purchases made with your card. 

Installment loans can be secured or unsecured, but typically it is easier to get approved for a secured loan. If you prefer to pay your loan back over time in equal installments, then an installment loan can provide a little bit more of a structure than payday loans. 

Payday loans can be a fast little pick me up for your finances in between paychecks and you don’t need a strong credit score to access funds.⁵ 

Learn How to Get Fast Funds Today

Whether you’re searching for a payday loan, installment loan, or a credit card, Max Cash^? is here to help! Finding out if you are eligible for the funds you need to get your finances back on track can be easier than you think. Complete a short inquiry form online today to get started for a payday loan or an installment loan! Or, just check out some of the available credit card offers from our partners.^{2 5}