What are the Differences between Payday Loan and Cash Advance?
Payday loan and cash advance are the two most explored lending formats by the people looking for an unsecured loan. Some borrowers tend to mingle them taking each an alternative of other interchangeably, but these are different. There is a wide variety of personal loans including long-term guaranteed loan, secured personal loan, unsecured short-term loan etc. The payday loan and cash advance both are the short secret lending formats designed to help the financially tight person pay any type of emergency expenses. Understanding the difference between the payday loan and cash advance will surely help you save big by choosing the right one.
Payday Loan – The Most Popular Borrowing Option:
It is a short-term small amount debt; therefore, lenders charge very high-interest rate. The borrowers don’t mind in paying little extra for small amount borrowing because of getting quick cash help almost instantly without getting indulged in complex documentation. Despite sky roaring APR, the payday loans have been the best pick for salaried professionals. The salaried professionals pay a high cost of a payday loan as it relieves them from financial stresses immediately. Arranging a guarantor, when you have poor credit score already, is a tedious task even for small amount borrowing; direct lenders solved this problem by introducing “no guarantor payday loan”. This is debt up to £500 to be paid in a single instalment on the forthcoming “salary date”. As the demand is increasing, it is being disbursed in diverse formats as per borrower’s requirement like bad credit payday loan, no guarantor payday loan, instalment payday loan etc.
Cash Advance Loan:
There are three major cash advance types:
The first type is structured very similarly to a payday loan. The credited amount is based on monthly income. The entire loan amount to be repaid in a single instalment on the next paycheck.
The 2nd type is based on the credit card report or line of credit instead of being based on monthly income. The sanctioned loan amount depends upon the credit available on a credit card. It is just like a purchase made on credit card with new repayment terms defined by the lending agency. Cash advance on credit card usually has high-interest rate along with high transaction fee.
The 3rd type of cash advance can be taken directly from the employer with a unique benefit of low-interest rate or no interest rate and no fee. The agreed loan amount is deducted from the monthly salary automatically; so, the borrower becomes free within a few months without worrying about managing the repayment.
A Comparative Study of Payday Loan and Cash Advance:
A cash advance allows to withdrawing cash directly from a credit card. It offers quick fast borrowing, but it shouldn’t be mingled with credit card standard lending. A cash advance allows for merchant cash advance also helping the business owners. Merchant cash advance depends upon the recorded monthly sales revenue. Comparatively, cash advance facility is more flexible. It is available for salaried and non-salaried both the borrowers. Getting funds as cash advance is more natural because the credit card issuer already knows all about the expanding capability and repayment trend. Here, the borrower doesn’t need to serve the identity again.
In case of a payday loan, the minimum borrowed amount can be as little as £50 while the standard maximum limit is £1,000. Some payday loan lending agencies demand proof of future earnings; therefore, recent bank statements become essential. It also requires to proof your identity through any document. Payday loans are paid in a bank account; and, these are credited even in an hour but APR maybe 1000% or even more. The tremendous growth of online payday lending stores in the UK means that borrower has more options to get the best deal with scope for negotiation.
Cash advance and payday loan are the fantastic options to overcome the emergency money problem. Whether you need to borrow from a professional agency to fix the financial problem in the home or to clearing the high interest pending debt, the short-term reasonably priced borrowing is an ideal solution. Making the right decision saves considerably. If you need small amount cash at urgency for short term to meet out emergency expenses that too without having a salary or monthly income proof, a cash advance is a better option. If you are a salaried borrower requiring a small amount to meet out unexpected expenses like car repair, a payday loan is right. However, paying the entire amount on the next salary day may disturb your saving plans or payment of monthly utility bills. A cash advance allows getting the required funds without opening the new account with the lender; therefore, it is the faster borrowing process with the added facility of being flexible in repayment.
Related: Myths about Payday Loans
The Concluding Note:
Even if you need the cash help fast, never rush to decide. Compare both the options as per your income and monthly living expenses organisations realistic ground because missing even a single due on time may drive you into a more serious financial problem.