A lot of people will scream at the monitor once they see the title of this article. Why, because there is general opinion that payday loans are same thing as cash advance loans, and that those two phrases represent the same thing. Well, sorry to disappoint you but you are totally mistaken in that regard. Yes, both of these loan types are short term loans, but they are not the same thing and there are obvious differences between them. I will try to explain that here. So let’s go through both of these loans and you will see the difference between them once I lay them side by side in one place.
Payday loans are called like because they were originally repaid by checks that were valid once the next paycheck comes, which was the case of the cash advance loans as well. But over time both of these things evolved. Now, payday loans are unsecured loans which have low requirements, for example in most cases there is no credit check, but only a proof of employment necessary for the approval of the payday loan. This loan is paid back in one payment on designated day, 2 weeks in the most common period at the end of which you have to pay back the loan.
Online payday loans also require the existence on running bank account because all money transaction are conducted via that account. Even payday loans require some minimal income, but it is around 1 000 dollars, after tax payment of course. And payday loans are given up to 1 000 dollars per loan, there is only a small number of companies, both online and real-time, who will give you payday loans that are higher than that. You will be denied a payday loan if it is found out that you have one or more loans of this kind which were not paid. Reluctance for higher amounts in loans is partially due to high interest rate that follows loan, for 1 000 dollars of a loan taken on two weeks you will have to return around 1 200 dollars, and lenders don’t want to risk more money on single borrower.
Cash advance loans are similar to payday loans in that they are still paid back on paycheck dates, and they are short-term loans too. But similarities end there. Size of the cash advance loan is calculated for every borrower, and there are two kinds of cash advances. One type of cash advance is determined by your income, while other type is connected to the limit of your card. Cash advances have low interest rates which makes them better in that aspect when compared with payday loans. But the time it requires to get a cash advance from the bank is something else. In that aspect payday loans have clear advantage over cash advances.
There you have it, the difference between these types of short-term loans. Now you can clearly see that saying that payday loans and cash advances are same thing is a mistake, because they are totally different and there are only several similarities between them.