Cash Advance vs Loan: What’s Best For Me?

Are you in desperate need of cash for upcoming fees and emergencies? Maybe you don’t have an emergency fund but you need to get a hold of cash quickly. Fortunately, you do have a couple of options at your disposal. For instance, deciding between a cash advance vs. loan may be worthwhile. 

In this article, we’ll lay out the differences between a cash advance and vs loan and go over the various pros and cons of each – giving you insight into making the right decision for your finances. 

One solution we’ll outline in this article that might be useful in an emergency is a personal loan. MoneyLion helps people get matched with personal loan offers. You can compare rates, terms, and fees from different lenders and choose the best offer for you. 

What is a short-term cash advance?

A short-term cash advance is a type of loan that provides borrowers with fast access to cash to cover short-term financial needs or bridge a cash-flow gap. These small, short-term loans typically range from $100 to $1000 and are repaid quickly, often at the borrower’s next pay date or within 30 days. 

Short-term cash advances have the benefit of delivering fast approval, such as same or next-day funding, but also come with higher interest rates than other types of personal loans.

To get a cash advance, one option is to withdraw money using your credit card and an ATM. MoneyLion’s Instacash^SM is not a loan, instead, it’s a cash advance that allows users to access up to $500 of their pay, early. No need to wait for payday to roll around! Best part? There’s no interest, no credit check, and no mandatory fees.

Pros

Cash advances or earned wage access, can be a worthwhile option when you need cash fast. When emergencies arise, you are encouraged to use your emergency funds, but when they are not available, cash advances are beneficial for many reasons.

• Fast funding: When time is of the essence and you can’t afford to wait days for approval, cash advances may be a worthwhile alternative. 

• Easy repayment: Loans require you to make multiple payments spread out over months. With a cash advance, you’ll repay what you owe at your next payday – talk about simplicity! 

• No credit check is needed: You don’t need to pull up your credit history to obtain a cash advance. This detail is ideal for people who have poor credit history but need cash fast.

• Zero interest: Loans, especially payday loans, can come with hefty fees. A cash advance works differently. You may even be able to find cash advances with zero-interest – just make sure to read the terms and conditions to be 100% sure. 

Cons

While cash advances certainly have their benefits, it’s important to be realistic and take note of the downsides of taking out cash advances.

• You’re not getting “extra cash”: Cash advances or earned wage access don’t get you more money, so if you find yourself needing more income than your paycheck pulls in, you may need to consider a different option, such as a personal loan.

• Potential for fees: Some fintechs charge additional fees that can make taking out a cash advance more expensive than appears at first glance. Make sure to thoroughly read all the terms and conditions before accepting a cash advance.

• Quick repayment: Every fintech or financial company is different, but cash advances are typically repaid on your next payday. Make sure you’re in a good place financially to cover your cash advance repayment and handle your day-to-day expenses. 

What is a cash loan?

Cash loans, or personal loans, are a little different from cash advances in that they can come with longer repayment terms and higher funding amounts. Cash loans can also be a valuable additional resource when you need access to money in a pinch. There are many types of loans but they all fall into one of two categories: secured loans and unsecured loans.

Unsecured loans

Unsecured loans do not require collateral as a prerequisite. Some examples of unsecured loans include:

• Revolving loans: credit loans wherein the borrower can withdraw a set maximum amount within a specified time.

• Consolidated loans: a loan borrowed to offset a preexisting unsecured loan

• Term loans: when a borrower receives a lump sum of money and repayment is set to take place throughout predetermined installments

• Personal loans: loans borrowed for personal reasons

• Student loans: loans taken out for academic purposes

Secured loans

Secured loans require collateral before the bank or issuer will administer the loan. Examples of secured loans include:

• Mortgages: secured loans with real estate as collateral

• Life insurance loans: cash used as collateral

• Vehicle loans: used for the purchase or repair of vehicles 

• Bad debt loans: ideal for people with bad debt

Beware of cash advance loan scams

Predatory lending practices can damage your credit and cost you in the form of hefty debts. Cash advance loan scams include illegal tribal loans, online payday loans, and loans offered outside of your state, among many other unlawful tactics.

How to get a cash loan with no credit

Getting a cash loan with no credit can be challenging but is possible through a few different options. One route is looking into credit builder loans offered by some credit unions and online lenders. These function similarly to secured cards, where the loan money is held while you make monthly payments, and the full payment amount plus interest is returned to you after you pay off the loan. 

Exploring cash advance vs. loans

When you urgently need cash, it’s important to carefully consider your borrowing options, especially when it comes to a cash advance vs a loan. Make sure you only spend the money on emergencies and always pay back the amount you borrow. 

To recap, a personal loan is a financing option that provides consumers with a lump sum of cash, which is then repaid in monthly installments over a set repayment term. Personal loans allow borrowers to obtain a fixed amount of money from a bank, credit union, or online lender, and pay it back with interest over time through regular payments.

On the other hand, a cash advance isn’t a loan. But it can be a great way to bridge the gap between payday and cover short-term, immediate needs. 

Whichever financing product you choose, a cash advance vs a loan, make sure to practice smart spending habits and always pay back the amount you owe. 

FAQ

Can a cash advance impact my credit score?

A cash advance may or may not impact your credit score. It ultimately depends on factors such as the fintech or financial company you’re working with, its specific terms and conditions, among other factors. Even if your cash advance doesn’t have an immediate impact on your credit score, it’s always best to practice smart money habits overall. 

How long do I have to repay a cash advance?

Cash advances often have a shorter repayment period compared to personal loans and some may need to be paid back by your next payday. Make sure to check with your provider to understand the repayment timeline.

How much can I borrow with a cash loan?

The amount you can borrow with a cash loan, such as a payday loan or personal loan, depends on various factors, including the lender’s policies, your income, and creditworthiness. Payday loans typically offer smaller amounts, often ranging from a few hundred to a couple of thousand dollars. Personal loans, depending on the lender, can offer higher loan amounts, potentially ranging from a few thousand to tens of thousands of dollars. The specific loan amount you qualify for will be determined during the application process, considering your financial situation and the lender’s criteria.