A payday loan and a cash advance might seem similar but they are both different in many aspects. Sometimes, you might find yourself in a situation where you are short on cash and need money quickly to make an urgent payment, in such a case, one needs to choose between a payday loan and a cash advance. The only thing which these two methods of obtaining finance have in common is that they allow you to quickly obtain money. Here are the key differences between the two terms in order for you to understand them better.
- Payday loans are a short-term loan facility which is easy to obtain due to the few requirements and have a high success rate. There are various lenders which can be found either online or in-store.
- Cash advances are a short-term cash loan facility which one can avail if they have a credit card.
How much can one borrow? Payday Loan Vs Cash Advance
It is a fact that payday loans can trap consumers in heavy debt and that is why the government has stepped in to protect the borrower. There is a limit of how much one can borrow through a payday loan which is normally around $100 to $1000 depending upon where one resides.
Whereas, the amount of money a person can borrow through cash advance is based on the percentage of their credit card limit which could possibly turn out to be some hundred dollars. Credit cards have various limits in place such as a daily limit, weekly limit or a monthly limit.
Therefore, it can be observed that the amount of money one can borrow depends on the state’s laws and their credit limit.
What are the Interest Rates?
Although the interest rates vary from lender to lender, the interest rates can be simplified for one to understand the different between payday loans and cash advances. Payday loans usually have an APR of up to 400% as they are typically paid back within two weeks and upfront fees are also charged such as $15 to $25 for a $100 that one borrows.
A cash advance on the other hand requires one to pay an upfront fee for the amount they take such as 5% or more of the amount and then additional interest is paid on the cash advance which is normally 24%. This helps one understand the difference between the two options.
Which option is better?
Although, the right option depends on a person’s needs and situation, a cash advance is a much more affordable option as one has to pay back little interest as compared to a payday loan.
Use the Best Lending Company
In order for you to find the best interest rates and an option which is easy, you need to use the services of 1st Class Loans so as to save money and obtain financing in a short amount of time. There are many advantages of using the services of the company as the service is 100% free.