Obtaining an unsecured loan has its own risks. While you’re required to put up collateral against your debt, you have to pay up higher interest with the rates escalating fast with each default. Now, those of you all who’ve already researched on the types of unsecured debts available in the market must have come across payday loans or the cash advance. They can be borrowed for a short period of time and are meant to meet urgent financial needs like paying up huge hospital bills, unexpected car repair fees or else for submitting a semester fee. Now both the cash advance and payday loans are used synonymously. But a deeper research would help you understand that there are subtle differences between these two. Go further through the post in a bid to know what these differences exactly are.
A Brief Description
Payday Loans: As already mentioned above, you can avail them for a shorter period of time (usually for 15-90 days). They are arranged faster than the traditional loans offered by the banks, as you are not required to undergo a thorough credit check in a bid to qualify. The amount of the debt obtained by you depends on your earnings and the repayment date corresponds to your pay date. You aren’t allowed to repay in installments. You have to pay back the principal plus the interests at one go. The amount (to be repaid) might be transferred electronically from your bank account or else you can provide a post-dated check that your creditor can encash on the date mentioned. They are alternately known as quick cash loans as well.
Cash Advance: Now, there are two types of cash advances available- one which you can avail from payday lenders and it works like the payday loans (as already described). Here, the maximum amount that you can borrow depends on your total income and can be repaid on your next payday within a month of taking them.
The availability of the second type of cash advance online loans are based on credit card or the line of credit. Lenders would consider your credit limit available on your credit card and not exactly on your monthly earning. It works just like the purchase made on the card and the repayment terms are similar to that of the terms and conditions of the credit contract. But please remember that there are companies that charge higher rate of interest than that of the standard card purchases. Borrowers with an approved credit card would be granted the cash advance. In some cases the cash advance limit does not cover the full line of your credit while in other cover it does. You can apply for the advance from your credit card company via phone or online and you would receive the amount in the form of a check and you’re set to receive your advance.
In general, unsecured loans of any type carry higher rates of interest than the secured ones owing to the uncertainty involved. The lender here has to deal with a much higher risk of not being repaid than the ones who’re offering secured loans.
