We’re talking about online payday loans with instant approval – those quick cash fixes, both online and storefront, that you see popping up all over. They usually have words like “easy,” “quick” and “cash” in their names, but words like “expensive” and “predatory” would be more accurate. 

These costly fast cash loan systems shouldn’t be confused with personal installment loans, which can be obtained from reputable sources and also issued very quickly – even on the same day in some cases. Installment loans are not exploitative like payday loans, and the lenders will consider your overall financial health, among other factors, before providing you with funds and a repayment timeline.

Let’s look deeper at personal installment loans vs. payday loans and shine a light on why you should avoid the latter at all costs.

Payday loan vs. personal installment loans 

You would be forgiven for confusing these two products since payday loan lenders often market themselves as “instant payday loans,” even though they aren’t the only lenders with the technology to deliver an instant loan. Granted, payday lenders can issue a loan quick enough to be instant – you could walk out of their shop with cash in hand – but they’re going to want repayment in an instant too

That’s an important distinction between payday loans and personal installment loans. The time of repayment for a payday loan is often within the next payday cycle, meaning you’re going to need extra money to pay off this loan in the very near future, or you’re going to get hit with some very punishing interest rates (more on that later). 

Installment loans, meanwhile, offer you the stress-reducing option to pay back your loan over time, in monthly payments. That gives you the time needed to adjust your finances accordingly and absorb the payments more easily than getting hit with debt immediately after needing to borrow money. As mentioned earlier, a reputable lender like Fresh Start Finances will consider your entire financial picture before setting a monthly repayment system, making sure you’re not getting in over your head and falling deeper into a debt cycle.

Payday loans prey on you with high interest

Payday loan lenders like to capitalize on a borrower’s urgency. You’re approaching them because you have an urgent need for cash. And they are happy to “help” you, but it’s going to come at an unsightly cost no reputable institution would charge (up to 600% interest!). 

It’s no surprise the province of Quebec has outright banned payday loans, while other provinces have recently tightened regulations on payday lenders. For example, the total cost of borrowing $100 in 2012 in Ontario was $21. In 2019, it’s now $15. That’s the same for Alberta, British Columbia, and New Brunswick.

Payday loan prices by Province

Province

Max. cost of borrowing $100 (14 days)

Annual Percentage Rate (APR)

Max. penalty for a pre-authorized debit or returned cheque

Alberta

$15

391.07%

$25

British Columbia

$15

391.07%

$20

Manitoba

$17

443.21%

$20

New Brunswick

$15

391.07%

$40

Nova Scotia

$25

651.78%

$40

Ontario

$15

391.07%

N/A

Prince Edward Island

$25

651.78%

N/A

Saskatchewan

$17

443.21%

$25

 

Consider an example where you borrow $1,000 from a payday lender in BC or Ontario, with a 14-day term. On your next paycheque, you are going to owe $1,150. And if you can’t make the full repayment, then it means late fees and possibly higher interest, plus the possibility of getting stuck in a revolving debt cycle that’s tough to break free from.

An installment loan is a better option because you can make the repayments over multiple months and the interest rate is going to be significantly lower. And believe it or not, making repayments on an installment loan is a net positive for your credit rating. It shows you can pay back a loan responsibly. 

Can you get an instant loan with bad credit? 

If your credit rating is less than perfect, don’t be intimidated from applying for an instant loan online. Most payday lenders will may off no credit checks, but as we said, using their services can come at a high price, and a rushed repayment timeline.

You have other options. If you need a loan within 24 hours Fresh Start Finance is an online lender that you can trust. We work fast and responsibly to get customers facing all types of credit situations approved in as little as 24 hours. We can also help you get your financing on the right track with savings tips and ways to build an emergency fund for situations exactly like the ones that send people to payday loan lenders.

Is there a way to raise my credit score with an instant loan? 

There’s actually a potential silver lining to needing money in a crunch. This can be an opportunity to tune up your credit rating—if it needs improving. Your credit score is a combination of multiple factors, but one of its main components is payment history. That’s where a personal installment loan can be beneficial.

Unlike payday loans, you can make monthly repayments on an instalment loan and that will improve your credit score over time because it shows your ability to pay back debt responsibly. This can help you in various ways, including getting better interest rates when borrowing money at a future date. 

With payday loans, you are not going to get the same positive credit bump on your portfolio. What you will get with payday lenders are predatory interest rates, stressful repayment schedules, and punitive fees.

Need an Online Instant Loan? 

Fresh Start Finance is here to help. We offer the hassle-free simplicity of a quick online application. It takes just 3 minutes to fill out, and you can have money deposited in your bank account within a day!