Payday Loan Compared To A Credit Card Cash Advance

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In case an emergency catches you flatfooted, you have limited options to come up with money, such as a payday loan. You can beg, borrow, or steal from your relatives or friends. However, if you make this a habit, pretty soon, you will run out of people to turn to.

Although beggars can’t be choosers, borrowers certainly should be. The fastest way to secure direct cash is from cash advance lenders, who are willing to give personal loans. Two of the better known personal loans are payday loans and credit card cash advance loans. There are differences between these two loans that even panicky borrowers should take the time to learn.

A payday cash advance loan is an unsecured loan for a relatively small amount that usually becomes due and demandable on the next payday. This means that cash advance lenders do not demand for collateral and usually do not conduct exhaustive background checks. All you need is proof of income, and the amount you can borrow is usually based on how much you earn.

You can secure a payday loan online, which only require borrowers to have a bank account. All transactions are done electronically. The loan is deposited in the account and the payment is deducted from the same account. There are also old-fashioned loans from a storefront, where a postdated check serves as a collateral.

A credit card cash advance is also an unsecured loan that is attached to a credit card. Most credit cards set a limit for cash advances that is usually a portion of the card limit. Your credit limit is not based on your monthly income, but it was considered when your card was approved. A cash advance is like a credit card purchase, and therefore payment terms are the same as any regular purchase. The interest varies from lender to lender, but note that there are those who charge a higher interest for cash advances.

A payday loan differs from a credit card advance in terms of credit scores. Credit checks are not de riguer with payday loans, all they want is your postdated check. Credit card advances on the other hand, go through a background check before receiving a card. This means that you have been pre-qualified even before applying.

As to cost, the average fee for a payday loan is about $15 for every $100, or about 15 percent every two weeks. Credit card cash advance fees range between 1 to 4 percent, depending on the company. The shocking rate for a payday loan is usually because the lender bears a bigger risk as he gives loans without doing credit checks.

The payment schedules are also different for these two. Payday loan typically runs around two weeks or the average payday. Credit card cash advances, on the other hand, follow credit card rules, i.e. a minimum amount is due every month until fully paid. Interest is paid on the remaining balance.

If you compare these two cash advances, a payday cash advance loan is harsher than a credit card cash advance loan. Prospective payday loan debtors should think hard before handing in their application to their cash advance lenders.

However, not all people qualify for a credit card. For those who are not so fortunate, they will have to bite the bullet and obtain direct cash from a payday loan lender.

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