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Payday Loan vs Installment Loan: What's the Difference?

written By
Kimber Severance
Reviewed by
Tracy Rawle
July 8, 2025

The difference between payday and installment loans is that payday loans are repaid in a lump sum, while installment loans are paid back over time.

Even if you manage your finances well, an emergency or other unexpected expense can quickly throw you off track. What’s more, surprise expenses aren’t as uncommon as you might think — as many as 1 in 3 Americans had to tap into their emergency savings in 2024.

If you find yourself facing a big expense and are short on cash, you’re not alone. Payday and installment loans are two options for borrowing money when you urgently need it. However, these two loan types are different, and it’s important to understand how they work before you apply. 

Let’s break down the difference between a payday loan vs installment loan so you can decide which is best for you.

Payday Loans

A payday loan is a short-term loan paid back on your next payday. This can be a last-minute option when you need cash right away and can’t afford to wait for your next payday.

Payday loans, also called cash advances, are offered by online banks and other lenders. You can think of a payday loan as a way to borrow money from your next paycheck now, where you will repay the loan, plus any interest and fees, with your next paycheck.

When to Use a Payday Loan

Payday loans are best used for emergency situations when you need money fast and payday is too far away. You might want to take out a payday loan if:

  • You need cash fast.
  • You don’t qualify for a traditional loan.
  • You have money coming in soon but not soon enough.

How to Get a Payday Loan

The application process to get a payday loan is pretty simple. First, you’ll want to make sure a payday loan is the best choice for you. Do your research and consider all your options, including installment loans (we’ll cover those below).

Next, follow these steps:

  • Find a lender: Look for a trustworthy direct lender. You can apply for a payday loan with Check City online or in person. 
  • Figure out what you need: Read online or ask your lender which documents are required. You may need an ID, Social Security number, bank statement, paystub, or other proof of income. 
  • Fill out your application: Follow the lender’s instructions to fill out the application. 
  • If approved, get paid: Once you’re approved, the lender will deposit your money or give you a check right away.

Benefits of a Payday Loan

Payday loans come with several advantages that make them a popular option for borrowers needing quick financial relief. When considering this type of loan, think about factors like repayment terms, approval speed, and whether the loan fits your short-term financial needs. Here are some key benefits:

  • If approved, fast access to funds: Many payday lenders offer same-day or next-day funding, allowing you to handle emergencies or urgent expenses quickly.
  • Simple application process: The approval process is typically straightforward and can often be completed online or in-store with minimal paperwork.
  • No collateral required: Unlike title loans or secured loans, payday loans don’t require you to offer an asset as security, making them more accessible for many borrowers.
  • Short-term repayment structure: Most payday loans are designed to be repaid in a single payment on your next payday, helping you resolve immediate needs without long-term debt commitments.
  • Convenient and flexible: With fast approvals and minimal requirements, payday loans are often used by individuals who need money in a pinch and don’t have time for lengthy application processes.

While payday loans can be a helpful short-term solution, it’s important to review the loan terms carefully and ensure you can repay the full amount by your due date.

Installment Loans

Unlike payday loans, installment loans are paid back in small amounts over time. This is a helpful option when you need to cover a big expense and want to build credit. 

What’s an Installment Loan?

An installment loan is a traditional loan offered by banks, credit unions, and online lenders. It offers structured repayments over a series of months rather than a single lump sum payment. 

The amount you can get with an installment loan varies depending on your qualifications, but it’s typically more than you can get with a payday loan. Your lender will set up a repayment plan so that you repay the loan in chunks each month. 

When to Use an Installment Loan

Compared to payday loans, installment loans offer more money but take longer to pay back. You should apply for an installment loan if you:

  • Need money up front for a large expense
  • Have a steady income to repay the loan over time
  • Have decent credit

How to Get an Installment Loan

Applying for an installment loan is much like applying for a payday loan. Once you’ve decided this is the right option for you, follow these steps:

  • Find a lender: You might be able to get an installment loan from your bank, or choose a convenient direct lender like Check City. 
  • Get ready: Collect all the documents you need for your application, including your ID, pay stubs, and bank account information.
  • Apply online or in person: Follow your lender’s instructions to complete the application, then wait for approval. 
  • If approved, get paid: Your loan will be available that day or within a few business days, depending on your qualifications. 

Benefits of an Installment Loan

Installment loans offer a more structured and manageable borrowing option, especially for those who need to borrow a larger amount or prefer to spread payments out over time. Here are some of the key benefits:

  • Manageable, scheduled payments: Instead of paying back the entire loan at once, installment loans are repaid in fixed, predictable payments over a set period, making it easier to budget each month.
  • Lower interest rates: Compared to short-term payday loans, installment loans typically come with lower interest rates, which can save you money over the life of the loan.
  • Flexible loan amounts and terms: Many installment loans offer a range of borrowing limits and repayment lengths, giving you the flexibility to find a loan that fits your financial needs.

For borrowers looking for a longer-term solution with a consistent repayment plan, installment loans can be a smart and affordable option.

Payday Loan vs Installment Loan

How do you decide between a payday loan vs an installment loan? Let’s highlight some key differences between these two borrowing options to help you pick the right one for your situation.

payday loans vs installment loans chart

Key Similarities

Both payday loans and installment loans share some common features:

  • If approved, fast access to cash – Both offer quick funding for urgent expenses.
  • No collateral required – Neither loan type typically requires a physical asset to secure the loan.
  • Short-term financial solutions – Both are designed for borrowers needing smaller loan amounts to cover immediate costs.

Key Differences

Despite their similarities, payday loans and installment loans differ in a few important ways:

Loan Amounts & Terms

Payday loans typically offer smaller loan amounts with very short repayment terms, usually 1 to 2 weeks.

Installment loans usually offer larger loan amounts with longer repayment terms, often between 3 and 12 months or more.

Repayment Structure

Payday loans are repaid in one lump sum, usually on your next payday.

Installment loans are repaid in multiple scheduled payments over time, making it easier to budget.

Bottom Line

Payday Loans are great for small, urgent expenses when you need quick cash and can repay the loan in full by your next paycheck.

  • 1 lump-sum repayment
  • 1 to 2 week term
  • Fast funding
  • No collateral

Installment Loans are ideal for borrowers who need a larger loan amount and want to spread out repayments over time.

  • Scheduled payments over several months
  • 3 to 12 month terms
  • Flexible funding
  • No collateral

Choosing between the two depends on your financial situation, how quickly you can repay, and how much flexibility you need in your budget.

FAQs

What do I need to apply for an online loan?

The exact documents you need depend on your lender. At Check City, you’ll need a government ID, a check or bank statement, and proof of income. Be prepared to provide your contact information and Social Security number. 

Does Check City offer payday loans? Installment loans?

Yes! Check City offers both payday and installment loans, depending on the state you live in, through an easy online application that helps you get money fast.

Can I pay an installment loan back early?

Yes! Paying off an installment loan early is a great way to improve your credit and save on interest.

Keep Learning

Payday Loans vs Personal Loans
The Difference Between Payday Loans vs Cash Advances
How Do Installment Loans Work?

Article sources

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Payday Loans are also commonly referred to as Cash Advances, Payday Advances, Payday Advance Loans, and Fast Cash Loans. Check City may, at its discretion, verify application information by using national consumer loan underwriting databases that may include information relating to previous cash advance transactions that Check City may take into consideration in the approval process. Approval, products, and loan terms may vary based on applicant qualifications and applicable state or federal law. See Rates and Fees for specific information and requirements. Some customers applying for payday loans or installment loans may be required to submit additional documentation due to state law and qualification criteria. CheckCity.com provides loan services in: Alabama, Alaska, California, Idaho, Kansas, Mississippi, Missouri, Nevada, Ohio, Utah, Wisconsin, and Wyoming. In Texas, CheckCity.com acts as a credit services organization/credit access business (CSO/CAB) and will not be the lender for loans obtained through this site; CheckCity.com will instead attempt to arrange a loan between you and an unaffiliated third-party lender.
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Customer Notice: A single payday advance is typically for two to four weeks. However, borrowers often use these loans over a period of months, which can be expensive. Payday advances are not recommended as long-term financial solutions. Loan proceeds issued through our website are generally deposited via ACH for next business day delivery if approved by 8pm CT Mon. – Fri.
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This is an invitation to send a loan application, not an offer to make a short-term loan. This service does not constitute an offer or solicitation for payday loans in Arizona, Arkansas, Colorado, Georgia, Maryland, Massachusetts, New York, Pennsylvania, or West Virginia. The maximum funded amount for payday loans or installment loans depends on qualification criteria and state law. See Rates and Terms for details. Utah Customers: For consumer questions or complaints regarding payday loans and/or title loans you may contact our Customer Service Department toll-free at (866) 258-4672. You may also contact our regulator, The Utah Department of Financial Institutions at (801) 538-8830. In California, CheckCity.com is licensed by the California Department of Financial Protection and Innovation pursuant to the California Deferred Deposit Transaction Law, Cal. Fin. Code D. 10.
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Please see Rates and Terms to check the availability of online loans in your state. Check City does not provide loan services in all states.

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