What Are Installment Payday Loans

I had heard of Installment Loans, but I wasn't sure what Installment Payday Loans were.

An installment loan is a multi-month loan, with fixed equal payments, spread out over a fixed amount of time. Kind of like a car loan or maybe even a mortgage.

So do these check cashing businesses have similar payday loans where the money is returned in installments? Often times, payday loans are due with a short duration. If the borrower is a few days late on the repayment of the loan, it can technically go into default and subject the borrower to additional fees and penalties. The ability to pay back a loan over a longer duration can save the borrower a significant amount of money, even if the initial rate is slightly higher.

These programs do in fact exist. And their interest rate is higher than the typical payday loan. But the ability to split the repayment over a longer duration makes it easier on the borrower and actually decreases the rate of default. A regular payday loan usually has processing fees of around $30 attached to it and is typically for around $300. This makes the processing fee a whopping 10% on average, of the money borrowed. Having to recycle this loan a few times with additional penalties can easily make the effective interest rate to be over 200% on an annualized basis. No wonder having an installment payday loan makes sense. Just avoiding the processing fee a few times might reduce the the interest rate by over 50%. Makes the 30% seem like a bargain!