Traditional Installment Loans vs Payday Loans and Revolving Credit

Traditional Installment Loans vs. Payday Loans

Payday loans originated as a single-payment loan that required proof of a job and a checking account. The loan’s single payment was typically set up on a borrower’s payday. The lender holds a personal check written by the borrower for the amount of the principal plus a fee. The check, dated for the borrower’s payday, is then deposited on that date. Depending upon state regulations, a payday loan may be converted to payments over a set period of time. Security Finance does not offer payday loans.

Traditional Installment Loans vs. Revolving Credit

With an installment loan, a set amount of money is borrowed and then paid off in monthly increments. As you pay off your installment loan, the money available to you does not automatically renew.

Revolving credit is an extension of a line of credit to an individual. The most well-know example of revolving credit is a credit card. You may borrow against it mostly, and the amount offered remains the same month over month – hence the word “revolving”. You aren’t required to use all of the credit available to you; rather, you pay the balance, or a required minimum, at the end of the billing period. Any money that you don’t pay off at the end of the billing period will accrue interest according to the terms disclosed by the lender. The credit line is automatically renewed as debts are paid off.

Conversely, a traditional installment loan will not automatically renew once it is paid off. This is because you typically get an installment loan when you have a specific need, such as a flat tire repair, an unexpected bill, a trip, or a home repair. You simply pay the monthly installment, and the agreement is completed once you’ve honored the terms of the agreement.

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