If you’re researching loan options, you’ve likely noticed how many loan terms seem to be used interchangeably. Personal loans are common for people looking for a way to cover unexpected expenses, and can range in small amounts from $100 to $1500, or even more depending on the type of loan. Payday loans and cash advances are two loans which are often used interchangeably, but feature some key differences.

Payday Loans

Also called payday advances, payday loans are unsecured, meaning there is no collateral and typically no credit check required. Payday loans are disbursed based on your income, and are designed to be paid back on a date that corresponds to your paydays. They are sometimes able to be paid back in multiple installments, but a typical payday loan is paid back in a single payment.

Payday loans taken out online typically require a bank account in good standing, as funds are transferred directly into your account, and your repayment is automatically withdrawn from that same account on the due date. 

Maximum loan amounts are dependent on income, and some institutions require a minimum $1000 per month income to qualify. Those with substantially higher monthly incomes may qualify for higher loan amounts. Though payday lenders normally don’t check your credit score, there is a database available that allows them to see whether you have other short-term loans. Some lenders will deny you if you have other unpaid loans, or if you are currently in bankruptcy.

Cash Advances

Cash advance is sometimes used to refer to a payday loan in the capacity of it being an advance on your paycheck. This type of cash advance is structured similarly to a payday loan, and are designed to be repaid on your next payday or within a month.

The other popular type of cash advance is based on a credit card or line of credit instead of monthly income. Credit-based cash advances are treated like a purchase made on a credit card, so your card company’s repayment terms come into effect.

As a general rule, unsecured loans come with much higher interest rates than secured loans or cash advances done using a credit card. This is because the lender is at a higher risk for not being repaid, because you are not required to provide any collateral beforehand.

At Progressive Debt Relief, we are determined to ensure you have the tools necessary to avoid future financial distress, and we strive to help you establish a debt free life with the peace of mind that comes with financial security.

To find out more about our services, or to schedule a complimentary consultation, contact us today.