Cash Advance vs. Personal Loan: Which Is Better?

If you are in immediate need of cash, there are two ways to acquire money instantly: cash advance and personal loans. A cash advance offers you short-term financing at high interest rates. Whereas a personal loan is a long-term financing tool that comes with low interest rates.

However, deciding between the two options based on just the interest rate is not a smart move. The best financing option actually depends on your needs and your credit profile.

In this cash advance vs. personal loan comparison, we will compare the two financing options in detail so you can easily decide whether a cash advance or a personal loan is the best option for you. 

Read on.

Cash Advance vs. Personal Loan: Everything You Need to Know

The two fastest ways to cover an unexpected expense are personal loans or a cash advance. Before we get down to discussing the differences between these two, let’s first learn what these options actually are and how they work. 

What Is a Cash Advance?

As its name suggests, a cash advance is a type of short-term loan that can be attained using a credit card or a merchant (for businesses). It is basically the money that you borrow against your credit card’s line of credit.

A cash advance has unusually high interest rates and fees, which is why you should really consider your decision before taking out a cash advance. It is meant to be repaid as soon as possible, ideally within weeks.

How Does Cash Advance Work?

A cash advance is designed for borrowers who don’t have enough time to submit a loan application or wait for approval. It is best for acquiring cash instantly. 

To get a credit card cash advance, you can either use your online bank application, withdraw money from an ATM, or go to the bank in person to withdraw cash.

When you obtain a credit card cash advance, the interest on it will begin to accrue immediately. They also have a higher interest rate than credit card purchases. What’s more, your credit card issuer will also charge an additional cash advance fee.

Therefore, you should be mindful when choosing this option because you’ll be in debt if you are unable to pay the amount back.

Pros and Cons of Cash Advance

Pros

• Quick funding time
• No application process
• No requirement for a credit check
• Convenient to acquire

Cons

• Very high interest rates and fees
• Limited amount allowed
• Affects your credit score

What Is a Personal Loan?

A personal loan is an unsecured loan offered by banks, online lenders, and credit unions to provide a lump sum at once. It can be acquired within days and can be used for debt consolidation, emergency expenses, repairs, medical bills, and other expenses.

Personal loans don’t require collateral and can be acquired despite your credit score. However, you are required to repay the loan in the form of monthly payments with interest, for a set loan term.

How Does a Personal Loan Work?

Personal loans can be acquired from any bank, credit union, or online lender. They have comparatively lower interest rates as compared to a cash advance. However, they cost more than secure loans as they aren’t tied to any collateral.

All the terms of your personal loan are outlined in the loan agreement, including the loan tenure, the monthly payments, the APR, and the repayment terms. The interest rates can either be fixed or variable, depending on your lender. Whereas the loan term can range from 1 to 7 years.

You may also be charged several types of fees, like an origination fee, an application fee, and a prepayment penalty if you decide to pay off your loan early.

Pros and Cons of Personal Loans

Pros

• Fast funding time
• Low interest rates
• Lump sum amount
• Longer loan term
• No impact on your credit score if you make timely payments

Cons

• High penalties and fees
• Higher monthly payments as compared to credit cards
• Extra eligibility standards

Cash Advance vs. Personal Loan: Which Is Better?

If you are in need of immediate cash and are unsure about which financing option to choose, consider your needs, how quickly you want the cash, and the cost of the loan. 

If you need urgent cash with fast accessibility and for short-term use, a cash advance is the way to go for you. However, do note that it will be costlier for you as cash advance comes with high interest rates and fees. 

But if you need to bear a bigger expense and are looking for a long-term financing option, you should opt for a personal loan. A personal loan comes with lower interest rates and a structured repayment plan. 

So if you need a bigger sum of money for a long period of time, personal loans are perfect for you. Apply now to get the most affordable personal loans from Cash in Minutes. We also offer bad credit personal loans in Utah, with same-day funding.