If you need to borrow money in Washington State and have less-than-perfect credit, you've likely seen both installment loans and payday loans advertised. They both promise fast cash — but they're very different products with very different costs.
This guide breaks down exactly how each works, what they cost in Washington, and which one is the better choice for your situation.
Installment loans are almost always better than payday loans. Lower effective cost, longer repayment period, and less risk of a debt trap. Payday loans only make sense for amounts under $200 when you're 100% certain you can repay in full on your next paycheck.
What's the Difference?
✓ Installment Loans
- Repaid in fixed monthly payments
- Terms from 6 to 72 months
- APR typically 7.99–160%
- Amounts from $500 to $50,000
- Builds credit history
- Predictable payment schedule
- No balloon payment
✗ Payday Loans
- Repaid in full on next paycheck
- Term: 2–4 weeks typically
- APR often 300–400%+
- Capped at $700 in Washington
- Does not build credit
- Single lump-sum repayment
- High risk of debt trap
Real Cost Comparison
Let's compare the true cost of borrowing $500 for 3 months using each option:
| Loan Type | Amount | APR | Total Repaid | Total Interest |
|---|---|---|---|---|
| OppLoans (Installment) | $500 | 99% | $594 | $94 |
| LendingPoint (Installment) | $500 | 29% | $538 | $38 |
| Payday Loan (WA) | $500 | ~391% | $575 | $75 (one-time) |
| Payday Loan (Rolled over 3x) | $500 | 391%+ | $725+ | $225+ |
The key difference: payday loans become catastrophically expensive if you can't repay on time and roll over the loan — which happens to most borrowers.
WA caps payday loans at $700 with a maximum fee of 15% ($75 on $500). However, you can only have 8 payday loans per year, and lenders must check a state database. Despite these protections, the effective APR still exceeds 390% for a 2-week loan.
When to Choose Each
Choose an Installment Loan When:
- You need more than $200
- You can't repay everything in 2 weeks
- You want to build or protect your credit
- You want a predictable monthly payment
- You might need to borrow again in the future
A Payday Loan Might Make Sense When:
- You need less than $200
- You are 100% certain you can repay on your next paycheck
- You have no other options and it's a genuine emergency
- This is a one-time situation, not a recurring need
Best Installment Loan Lenders in WA
These lenders offer installment loans to Washington State residents — including those with bad credit:
The Cheapest Option Most People Miss: Credit Union PALs
Before choosing either a payday or installment loan, it's worth knowing about a third option that's dramatically cheaper: the Payday Alternative Loan (PAL) from a Washington credit union. Federal credit unions cap PAL rates at 28% APR — compared to roughly 391% for a payday loan. On the same borrowed amount, that difference is real money in your pocket.
Washington credit unions like Peninsula Credit Union, WSECU, and Sound Credit Union offer small-dollar loans (typically $200–$2,000) designed specifically as a payday-loan alternative. Many approve based on your income and credit-union membership rather than a hard credit pull, so they're accessible even with poor credit.
A credit union PAL gives you the fixed-payment structure of an installment loan at a fraction of the cost. If you qualify for membership (many WA credit unions have easy eligibility), this is almost always the smarter choice over a high-cost payday or installment loan.
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This guide is based on official Washington State sources. We encourage you to verify current rules directly:
- Washington State Department of Financial Institutions (DFI) — the state regulator for payday and small loans. Verify any lender's license here.
- RCW 31.45 — the Washington law governing check cashers and small loans.
- Consumer Financial Protection Bureau (CFPB) — federal consumer protection resource for borrowers.