INSTALLMENT VS. PAYDAY LOANS

							INSTALLMENT VS. PAYDAY LOANS
• Installment loans are a safer, cheaper and more convenient alternative to payday loans for individuals who do not have access to bank or other financing options. • Unlike payday lenders, installment loan companies have long operated within a legal framework, licensed and thoroughly regulated by State and Federal consumer protection agencies. • Installment loans offer terms and levels of safety over and above those offered by payday lenders. These include: Installment loans are less expensive for the consumer than payday loans. Installment lenders do not impose pre-payment penalties on loans. Installment lenders work out a borrower’s ability to repay a loan before making it, using a monthly net income/expense budget based on information provided by prospective borrowers, thereby ensuring that proposed monthly loan payments are affordable. Installment lenders report data with lenders to credit bureaus, which helps borrowers build their credit histories over time. A monthly installment payment, rather than a single payment, provides a manageable method of repayment, allowing borrowers to pay off interest and reduce principal each month. • Installment loans differ from payday loans in that they address the cycle of debt problem for borrowers through payment plans that allow affordable monthly debt reduction without the constant renewals of single pay loans. • Access to credit is one of the ways in which Americans can rehabilitate poor credit and build wealth for the future. Installment lenders play an important role in providing this opportunity for the less fortunate.
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AFSA Members are committed to supporting financial literacy education, believing that an educated consumer is a reliable customer, empowered to make sound financial decisions.