When we do not have enough savings to deal with a sudden financial urgency, a cash advance or an online payday loan can be extremely helpful
But which one is more suitable? Let us find out.
How is a cash advance and payday loan different?
- Terms of payment: In both the system the borrowed amount of money needs to be repaid with the interest and fee along with the original amount on the next payday. The amount is generally limited so are the loans that are short term so the repayment is done within the next payday so people are released from the burden of dragging a heavy loan for years.
- Processing: The loans serve different people differently so it cannot be ascertained which one is more beneficial in general. But the processing of both the loans is easy and free of complexity. The desired amount is generally reflected in the account within 24 hours.
In the case of a cash advance, the money can be obtained instantly. The only thing necessary for obtaining the loan is an active bank account and a valid phone number. Anyone above the age of 18 can apply for such loans.
- Interest rates: In both types of loans the borrower needs to pay a heavy interest along with the original amount. The interest of the money pulled out from the credit card is much higher than of the things bought by that credit card. The amount of payday loan might be less but the lender charges a high rate of interest because of the fact that they only keep track of the income and nothing else. In some cash advances, the lender pays some amount well in advance before the paycheck is given and that amount is deducted from the next paycheck. Typically this type of lending is interest-free.
- Expenses: Payday loans are not ideal for covering major expenses as the amount approved for the loan is considerably less. On the contrary, the cash advance grants you money based on your income. There is one more type of cash advance that is approved depending on the spending limit of your credit card. That too is not is ideal for major expenses.
- Limitations: As both these loans are unsecured ones generally these need to be paid at one go. In regard to payday loans, some lenders arrange for payment in several instalments. But the cash advance is deducted from the paycheck at once including the interest. In case of a credit card cash advance, the return policy follows the terms and conditions of the credit card.
While deciding it is worthwhile to remember that cash advances are drawn out money from your credit card, so obviously it mandates that you have a good credit score. But for some payday loans in Maryland no credit check is carried out. The only thing the lenders see is the income of the borrower.
So you need to carefully weigh out your specific needs and criteria to make an informed decision.