Find out if there’s a difference between payday loans and cash advances to determine which short-term borrowing option best suits your financial needs.
When deciding between different financial services, it’s important to consider factors like repayment terms, fees, and eligibility requirements. Before choosing, review loan terms carefully and ensure you have a solid repayment plan to avoid unnecessary debt.
This article will go over what payday loans and cash advances are and whether they are the same financial product or how they might be different.
What is a Payday Loan?
A payday loan is a short-term loan designed to be repaid in full on your next paycheck. These loans are commonly used for emergency expenses when immediate cash is needed but future paycheck funds are not yet available.
Key Features of a Payday Loan:
- Typically ranges from $100 to $1,000
- Repayment is usually due within two weeks to one month
- Borrowers must provide proof of income and a checking account
What is a Cash Advance?
A cash advance is a way to borrow cash from an available limit like a future paycheck or credit limit. A cash advance allows borrowers to take out an advance against their existing credit line or future wages.
A payday loan is a type of cash advance because it allows borrowers to take out cash against their next paycheck.
Key Features of a Cash Advance:
- Can be taken from a credit card or payday lender
- No fixed repayment schedule for credit card advances
- Repaid in 1-2 payments for payday loan advances
Payday Loans vs Cash Advances
The terms “payday loan” and “cash advance” are often used interchangeably to refer to a short-term loan.
A payday loan is a short-term loan from a payday lender that allows borrowers to use their next paycheck to borrow the money they need now.
A cash advance is a loan from a lender, bank, or credit card that allows borrowers to use their future paycheck or an available credit limit to borrow the money they need now.
A payday loan and a cash advance loan are essentially the same type of financial product. They both refer to a type of loan that allows you to borrow money “in advance” of something. But a payday loan only borrows against your next payday, while a cash advance may allow you to borrow against other types of future income or available credit limits. For example, some credit cards have a feature that allows the credit card holder to take out cash at an ATM from the limit available on their credit card. A credit card cash advance isn’t borrowing from your next paycheck, but rather from an available credit limit amount that you are approved to use.
Payday Loan or Cash Advance: Which One is Right for You?
Both payday loans and cash advances provide quick cash, but the right option depends on your financial situation, repayment ability, and what’s available to you.
Choose a Payday Loan If:
✔ You need fast cash and don’t have a credit card.
✔ You can repay the loan in full by your next paycheck.
✔ You have a steady income but need a temporary financial boost.
Choose a Cash Advance If:
✔ You have a trusted payday lender that offers payday loans aka cash advance loans
✔ You have a credit card that offers a credit card cash advance.
✔ You need cash in hand as soon as today.
