Payday Loans vs Cash Advances: A Comprehensive Comparison
Cash advances on credit cards and payday loans are two of the most common methods used to access quick cash. Each option has its own benefits and drawbacks, but which is better for your financial situation, cash advance vs. payday loan?
In this article, we will take a look at the key differences between taking out a cash advance on a credit card vs. getting a payday loan. We will also explore why one might be more beneficial than the other in certain situations. When you are in a bind and need cash fast, you may be wondering what your options are. Payday loans and cash advances on credit cards are two popular choices, but which one is better?
Payday loans are typically small, short-term loans that must be repaid in full on your next payday. Cash advances on credit cards, on the other hand, are typically larger sums of money that can be borrowed against your credit limit and repaid over time. Which means they can be great for debt relief.
How Do Payday Loans Work?
In general, payday loans work by you borrowing a set amount of money and then repaying it plus interest and fees on your next payday. With a payday loan, you usually write a personal check for the amount you want to borrow plus any fees and interest charges. The lender holds onto the check and cashes it on your next payday when the loan is due.
Some payday lenders also require that you give them access to your bank account so they can automatically withdraw the repayment amount on the due date.
Payday loans usually have much higher interest rates and fees than cash advances, which can make them very expensive. Their fees can vary depending on the lender, but they are usually around 15$ for every 100$ borrowed. That means if you borrowed $500, you would have to pay back $575.
Payday Loan Pros and Cons
When you are in a bind and need cash fast, you might be considering a payday loan. As much as it can be tempting to get the money fast, you need to weigh both pros and cons before getting it.
- Easy to apply
- You can borrow money to cover expenses until you get paid
- The loan can be paid directly onto your bank account
- You can take multiple loans
- Very little time to repay it back
- High-interest rates
- Possible fees
- Only good for short-term goals
There are several advantages to taking out a payday loan. For one, they are very easy to borrow and you get money fast. Additionally, you can usually take out the money you need to cover expenses until you get paid.
On top of that, with payday loans, you can get the money directly into your bank account. This is very convenient. And finally, you have the ability to borrow more than one payday loan.
When it comes to payday loans, they do have cons you should carefully think about before you decide to get one. For one, they tend to come with very high-interest rates.
On top of that, once you get one, you will have very little time to pay it back. In some cases, that time might not be enough. Finally, these loans are good only for short-term goals.
How Do Cash Advance Loans Work?
The way a cash advance loan works is quite simple. You simply borrow the money you need from a lending institution and then use it to pay off your debts. Also, you can simply use your card to withdraw cash from an ATM or to get cash back from a merchant.
Most cash advance loans have a term of two weeks, although some lenders may offer longer terms. At the end of the loan term, you will need to repay the entire loan plus any interest and fees that were charged.
Cash advance fees are also variable depending on your card issuer, but they are typically around 15$ for every 100$ you borrowed.
Cash Advance Loan Pros and Cons
Getting a cash advance loan can be a great thing but you do need to understand there are both pros and cons to getting one. Make sure you carefully think about them before making a decision.
- Easy application
- Quick approval
- Possibility to roll over into a new loan
- Must repay the loan all at once
- Possibility to end up in debt
- You are borrowing against your next payday
One of the biggest benefits cash advance loans bring is that you can get one very easily. Also, they are very quick with approval, so you will not need to wait long. This can be a very helpful thing since you can get the needed money at any time.
On top of that, in case you are unable to repay the loan back on time, you can roll over it. This means you can combine it into a new one.
There are several potential drawbacks to taking out a cash advance on your credit card. First, cash advances usually come with higher interest rates than regular credit card purchases. This means that you will end up paying more in interest if you don’t pay off your advance quickly.
Additionally, many credit cards charge additional fees for cash advances, including transaction fees and ATM charges. Finally, taking out a cash advance can also lead to debt.
Payday Loans And Cash Advances: Are They Good or Bad?
Assuming you have good credit, a cash advance from your credit card will almost always be a better option than a payday loan. The interest rate on a cash advance is usually much lower than the interest rate on a payday loan.
On the other hand, payday loans can be a great thing if you need money for a short period of time to cover your expenses. They can also be deposited directly onto your bank account, so you don’t have to go to the bank.
Overall, both options can be good but you do need to be careful and diligent with your payments if you don’t want to end up in debt.
Alternatives to Payday Loans and Cash Advances
There are a number of alternatives to payday loans and cash advances, depending on your needs. If you need short-term financial assistance, you may want to consider a personal loan. You may also be able to qualify for a 0% APR introductory rate on a personal loan if you have good credit.
In case you need money for an emergency expense, you may want to consider using a credit card. You can also ask your friends and family to borrow your money.
- Personal loan
- Credit card
- Friends and family
We all have been in a situation where we need the money fast. And that’s when a lot of people choose between payday loans vs. cash advances.
Both of them can be good solutions but you need to be careful and diligent with paying back the loan. So, make sure you don’t miss them.
In this article, you will find all the needed information about them so you can make the choice most suitable for you.