If you do an online search or two seeking unsecured loans, you may have seen these two terms: cash advances and payday loans. Several people tend to use them indistinctly. Both are types of personal loans online, but they are dissimilar. There are some other types of personal loans ranging from small amounts of loans to large amounts of loans.
However, cash advances and payday loans are usually considered short-term loans that are taken to help with some type of immediate expense, such as paying an emergency or paying delinquent bills.
Explanation of Payday Loans
Payday loans are also known as personal online loans or payday advances. This type of loan is an unsecured loan, which means that the borrower does not have to deposit any collateral. Nor is a credit check usually required to be approved for this type of transaction. The features of a payday loan include:
· Granted on the basis of your income.
· Designed to be paid in full on a certain date.
· Usually refunded using your paycheck.
· Payment arrangements are occasionally made but this is rare.
Are There Any Maximums for Payday Loans?
The total amount you can borrow just depends only on your income and your next check.
· Most sites require you to earn at least $ 1000 monthly to extend a credit line.
· Those who earn more than $ 1000 per month can borrow more provided they can verify their income.
· Payday lenders generally do not rely on credit checks.
· Payday lenders can check a national database to see whether you have other outstanding payday loans.
Explanation of Cash Advances
Several people use payday loans and cash advance as synonyms and there are a few basic similarities. There are mostly 3 types of cash advances:
1. A type of cash advance is structured the same to a personal loan or a payday loan in which the amount borrowed is just based on your income. They are designed to be reimbursed in a month or once you receive your next paycheck.
2. Another type of cash advance is based on your line of credit. Rather than relying on your income, it is based on the credit available on your credit card. It is more like a purchase you make with your card and the refund process is defined by the policies and terms of the credit card.
3. The third cash advance is directly received from your employer. Generally, employers do not charge additional fees but draw money from your subsequent checks.
Obtain a Cash Advance from a Credit Card
Cash advances on a credit card can have a high-interest rate. Plus, it can carry a considerable transaction charge. You can use any ATM (Automated Teller Machine) to obtain your cash advance, but you can also charge another fee. Interest is the hard part of a cash advance on a credit card.
Sometimes, the credit card company divides the balances from the purchases and a cash advance, yet the monthly payment can be applied to both balances. When a borrower pays the minimum required payment, the credit card companies can apply the payment to the balance with the lowest interest rate.
Which Is Better a Cash Advance or a Payday Loan?
Either one can offer you a better deal depending on your financial situation. Which works best for you just depends on the terms of the payday loan and the terms of your credit card. Sometimes, the credit card companies have higher interest rates in a cash advance than do on normal purchases.