Creditors may have slightly different ways to describe their types of loans, and in a recent survey, we found that some customers may not fully understand all the differences between single payment loans and installment loans.
In general, a single payment loan is a shorter term loan that’s intended to be paid back in one lump sum on a date agreed upon by you and your creditor. The loan and your payment are typically not reported to the credit bureaus.
An installment loan is typically paid back in multiple payments on set dates agreed upon by you and your creditor prior to taking out the loan. It is sometimes called a “personal loan.” Depending on the creditor, an installment loan may or may not be credit reporting, so be sure to ask.
As you think about which type of loan is best for you, here are some things to consider:
1. Repayment Terms
Is one payment easier for your personal accounting? Are multiple payments easier to manage with your monthly budget? Does your creditor have flexibility with moving your payment date(s)? Do they charge any additional fees for extensions or payment plans? Are there are any penalties for paying early? Ask your creditor these questions before making a decision.
2. Credit History Requirements
Installment loans, particularly if they are credit reporting, often require a higher credit score than a single payment loan. Single payment loans may not require a credit check, so they could be more accessible. At LendUp, most of our customers start off with a single payment loan and, over time, can earn LendUp Ladder points that could lead to credit reporting installment loans (where available).
3. Bureau Reporting
If building credit is the primary reason you’re seeking a loan, check with your creditor prior to applying for or signing anything — knowing your payments are being reported could be a great added benefit. If the loan isn’t credit reporting, this means that payments are not reported to any of the three major credit reporting bureaus. Read more about the benefits of an installment loan.
Want to learn more about LendUp Loans? Listen to our Co-Founder and CEO, Sasha Orloff, talk about why LendUp is a better alternative to a payday loan.
Disclaimer: LendUp is not providing financial, legal or tax advice. If you need or want such advice, please consult a qualified advisor.