Difference Between Payday Loans And Credit Card Cash Advance

If you need some extra cash, there are as many options in Singapore as there are stars in the sky. Okay, maybe not that much, but you get the point. From personal loans to payday loans, secured loans to unsecured loans, and credit cards to credit card cash advances, you can borrow money from practically any kind of financial institution. But how do you know which is the best kind of loan for you? Here we will focus on 2 kinds of personal loans – payday loans and credit card cash advances – to give you an idea of the options available to you.

Payday Loan:

This is a confusing type of loan, but the clue is in the name itself. A payday loan is the kind of personal loan where you receive the loan based on your salary, and you pay it back along with interest by your next payday or thereabouts. Payday loans are usually for small amounts, and small tenures – the terms may vary from one moneylender to another. These loans are not given by banks but by licensed moneylenders or loan companies.

Credit Card Cash Advance:

Credit card cash advance is a cash withdrawal you can make with your credit card. This depends, not on your salary, but your credit limit. For example, if your credit limit is S$8,000, and your existing card dues are around S$2,500, you can take a cash advance of up to S$5,500, irrespective of what your salary is. The repayment amount will be mentioned from the next bill onwards and you can pay it just how you pay your credit card bills.

Difference Between Payday Loan and Cash Advance:

Payday Loan	Credit Card Cash Advance
This is given by moneylenders and loan companies.	This is given by credit card companies and banks.
The interest rates can be negotiated between you and the lender.	The interest rates are non-negotiable and possibly higher than that on payday loans and your credit card usage charges.
There are usually few hidden charges.	There may be several hidden charges including transaction fees, withdrawal fees, application fees, service fees, etc.
Repayment period is flexible and can be negotiated.	Repayment has to be made every month along with the credit card bill.
Your credit score is not very important in getting approval for a payday loan.	Your credit score could be checked by the bank of financial institution before the cash advance is given to you.
Tenure of the loan is short – from 1 week to a few months.	There is no limit on the tenure as long as you repay the loan regularly and on time.

These two kinds of loans have 3 important similarities, though: a) they are easy to obtain; b) they are both unsecured loans; c) interest is compounded on a daily basis for both. This means that both of the options are very expensive, and you may end up paying more than double the money you borrowed back to the lender even within a short period. If your need for money is not urgent, it would be better to go for a personal loan from a bank than go for any other options.