If you need to borrow money fast, you have probably ran across multiple financial institutions offering cash advances and payday loans. But what are the difference between them and which one is best for your situation? Aren’t they the same thing?
Read more about the differences between the two to help you determine whether cash advance or payday loans are the right choice for your needs.
Types of Cash Advances
The words “cash advance” are often used synonymously with the words “payday loan” when referring to obtaining an advance on your paycheck. This type is usually structured in a similar way as an online personal or payday loan, in that you can only borrow a certain amount based on your income. These types of cash advances are meant to be repaid when you receive your next payday. These short-term loan is usually required to be repaid within a month.
The second type of cash advance is actually based on a line of credit or credit card. It is based on a credit card or available credit limit, and not on your monthly income amount. Cash advancement on your credit card is treated like a purchase you made on the card and the repayment terms are typically the same as if you made a purchase.
Often called payday advances, payday loans are a form unsecured loans that require no collateral and typically not credit check. These types of loans are obtained based on your income and meant to be repaid on your next pay date. However, the repayment schedule of these loans is often flexible and can be repaid in multiple payments.
Most online payday loans do, however, require you to have a bank account where the money borrowed can be transferred. This bank account will also be where your repayment is deducted from electronically on the predetermined due date. Payday loans obtained from a storefront usually require you to write a post-dated check that the financial institution will deposit or cash on your next pay date. However, the actual term of your loan will vary depending on the company you are working with.
The amount of money you can borrow with a payday loan depends on the amount of income you make. These limits usually range from $100 to $1000. People with a much higher income may be able to borrow higher amounts. This will all depend on the financial institution you are dealing with.