Installment Personal Loans vs. Payday loans
In general, payday loans are for a shorter duration than personal loans, have a higher interest rate, and are often paid back in a single, lump sum payment (often the next paycheck). In contrast, an installment loan is repaid over the course of many months and payments are evenly spread out over the term of the loan.
Taking better control of your finances
Finally, a personal loan’s repayment schedule can prevent you from falling into worse credit. A personal loan has equal monthly payments and a definite end date to your repayment schedule. On the other hand, a credit card debt can hang over your head forever if you only make minimum monthly payments. If you have a large credit card debt that you are not paying off fully every month, consider consolidating it with a personal loan. The structured nature of personal loan payments can better assist the borrower to develop a budget and stick to it!
Getting a personal loan with bad credit
A bad credit score, one that’s below 630, doesn’t have to keep you from getting a personal loan. Some online lenders cater specifically to people with bad credit. These companies take into account your credit scores and history when deciding whether to loan you money, but they also have more flexible requirements than banks do.
While personal loans from reputable online lenders can be good options for many borrowers, NerdWallet recommends you first visit your local credit union when shopping for loans. Most credit unions offer flexible loan terms and lower interest rates than online lenders, especially for people with bad credit. The maximum annual percentage rate at a federal credit union is 18%.
If you can’t get a loan through your local credit union, NerdWallet recommends you compare offers from multiple lenders before signing any loan agreement. Rates for bad credit borrowers can vary depending on the lender’s underwriting requirements. The easiest way to compare actual rates is to pre-qualify. Learn about the pre-qualification process.