An installment loan will almost always have better terms for the borrower than a payday loan. Whereas installment loans are paid back over time in smaller monthly payments, payday loans are usually paid back in a single lump-sum payment. Installment loans also lend bigger sums of money than payday loans and have lower fees and interest rates. Payday loans should be reserved for last-resort scenarios when you are faced with a short-term cash crunch in between paychecks.