Installment payday loans are a newer variation on the payday loan. Most times, the payday loan is understood to be a loan on an upcoming paycheck. When the paycheck is received the total loan amount of the loan plus any fees is repaid, which may constitute all or part of the check depending on amount borrowed. When an installment repayment process is initiated instead, the borrower repays the loan in increments or installments, usually timed to coincide with receiving paychecks. These installments may be easier to pay than sacrificing a single large amount at once, but they also greatly increase total amount of money that actually needs to be repaid.
Typically, installment payday loans are understood as loans needed by those with very bad credit, and who cannot get a loan by any other means. Since many small personal loans and even instant credit cards are available to people with good to excellent credit that quickly need money, installment payday loans can be considered a loan of last resort. Due to the potential cost of these loans, it makes good sense to avoid them whenever possible. Interest rates often exceed 30% and there may be loan fees or loan origination fees which cost a great deal of money too. Actual repayment can easily double the amount loaned, so that even though these loans come on easier repayment terms, they do so at additional cost to the borrower and can take many months to repay fully.
Given the repayment structure and fees of these loans, and the fact that they may create much more debt for the person borrowing, such loans are also called predatory loans. Some feel companies that make these loans “prey” on those in the least likely position to repay and with the most financial damage to their name. There remains a steady opposition to the practices used by such lenders in the US congress, and there is also support for these practices. It is thought, though, that eventually Congress may try to address or limit the activities of lenders who offer installment payday loans.
On the other hand, a person who desperately needs money and does not have the credit score to borrow by other means might be able to find financial rescue in one of these loans. They will pay more money back, but potential borrowers might consider these extra payments worth the cost of obtaining money right away. Installment payday loans are usually not given in particularly high amounts and are often capped at $1500 US Dollars (USD); some companies loan even less. Therefore one of these loans could offer some financial help, but in today’s expensive world, they may not be able to offer adequate help for extreme financial emergencies.