Payday loans and cash advances are often used interchangeably. Generally speaking, the purpose of payday loans and cash advances are very similar. They help people in a bind by giving them the opportunity to receive a short-term loan to cover unexpected expenses.
So, what makes them different? To find the answer you must first understand what each loan means and their unique benefits.
What are Payday Loans?
Payday loans can offer quick and easy access to money for people who may be having temporary cash flow problems or are facing a financial emergency and need to borrow funds for a short length of time.
You don’t have to issue collateral or undergo a credit card check to be approved. These loans are generally repaid on the borrower’s following pay period. A payday loan is ideal when the borrower needs anywhere from $100-$500.
To be considered eligible for a payday loan, you must fit the requirements:
- Government Issued ID
- Proof of Income (paystubs or direct deposit and possibly checking account information)
- Checking Account
- Check or Debit Card
- Social Security Number
After applying for the loan and being approved, the money is electronically deposited directly into your active checking account within a 24-hour time frame. If the loan was written in store, you will receive instant cash!
Not all states allow for payday lending. Visit the Payday Lending State Statutes to see if your state is one of them. For more information on how to get a payday loan in the Kansas City metro, visit our blog.
What are Cash Advances?
There are two different kinds of cash advances. A traditional cash advance is identical to a payday loan. A credit card cash advance, on the other hand, allows you to take out a loan against the limit on your credit card.
Essentially, instead of purchasing what you need using your credit card, you are purchasing cash with your card that must be repaid later. These loans are beneficial if you need cash immediately, at any time. If you have a PIN number associated with your credit card, you can get cash advances directly from an ATM.
Your credit card cash advance limit is not your full credit card limit, but in between your available balance and your total credit limit. Unlike the grace period that you receive with normal purchases made on your credit card though, a credit card cash advance begins to accumulate interest immediately.
To request a credit card cash advance, you will need:
- A credit card provider that allows cash advances
- Your credit card
- Your credit card PIN
- An ATM or bank associated with your account
What are the Main Differences?
While there are no differences between a traditional cash advance and a payday loan, a credit card cash advance brings with it significant distinctions.
You do not need to apply for a loan. There is no need to go in store or wait 24 hours for a deposit into your account. Although this may sound more convenient, since the interest rates for a credit card cash advance can be much higher than the interest rate for purchases on your credit card, this can be an extremely costly choice.
Repayment is also different. Typically, with payday loans, your loan is paid back all at once when you receive your next round of income. For credit card cash advances, you can carry your loan into your next statement period indefinitely, but if you are only paying the minimum balance on your credit card each month, your total cost will well exceed a payday loan down the line.
If you are someone who can be forgetful with payments or wants the security of knowing your loans will always be paid back on time, a payday loan would be the best option for you.
So, which do you choose? That will be up to you!
Short on Cash? We Have You Covered
We understand that life can be unpredictable. If you need a little extra money to tide you over, get peace of mind with Money ‘N Minutes on your team!
Visit our Kansas City payday loan location or apply for a payday loan online and receive funds the next business day. Give us a chance to earn your business. You won’t be disappointed!
