Cash advances, which are also often called as payday loans are actually small short term loans that almost anybody can get. Along with an interest rate that is pretty high the borrower is also required to pay a fee for the loan and the loan duration is never more than a month.
It is true that cash advances can get the borrower instant money when it is required, but at the same time they are pretty expensive too. According to the Customer Financial Protection Bureau the fees on payday loans for a period of two weeks can equate to 400% or even higher APR.
Where are they different from personal loans?
If you are thinking about taking Online Cash Advance Loans it is important that you have a very clear idea about them and also know their differences with personal loans, which may be a better choice if available. There are several key ways in which cash advances differ and they are –
- Rate of interest: the rate of interest on personal loans is significantly lower than cash advances and is around 2.5%+ varying marginally with different lenders. On the other hand rate of interest on small payday loans can be as high as 400% or even higher.
- Loan amount: When it comes to personal loans, there is no restriction on the maximum amount. It all depends upon the requirement of the borrower and financial capability of the lender. On the other hand there is a fixed cap on the maximum loan amount in case of quick payday loans and the limit is different in different states and normally the maximum loan amount is not more than $500.
- Terms of repayment: Personal loans have much longer repayment duration that can be anything between one to seven years depending upon the terms and conditions. But the duration for a payday loan is often one to two weeks and never more than a month.
- Easy availability: One major reason that people take payday loans are their easy availability. Personal loans often involve a lot of paperwork and take a long time to get approved. Moreover, all personal loan requests may not be approved for various reasons. But practically anybody who has a fixed income can get Quick Cash Loans well within 24 hours.
- No credit check involved: This is the reason behind the quick and easy availability of payday loans. Personal loans always involve checking the credit history of the loan applicant and candidates who don’t have a good credit record are less likely to get their loans sanctioned. On the other hand, payday loans thrive on people who have poor credit history and don’t have the chance of getting personal loans. People who have a fixed income, have an active bank account and valid proof of identification are entitled to get cash advances any time they want.
Now you can see those personal loans, though less easily available are better options than the payday loans, but payday loan can also save you during an emergency and you need to be judicious about taking these loans repeatedly.