Payday Loan vs Cash Advance: What Are the Differences?

Cash advances and payday loans have become increasingly popular for meeting urgent needs. Marketed as fast cash, it targets borrowers looking for an easy and convenient way to access cash. 

A payday loan is a short-term loan you must repay on your next paycheck. Meanwhile, a cash advance is a loan you can take through your credit card. 

And while both are tempting options, proper financial planning should still be considered. Familiarize yourself with their terms before deciding which will work best for you. Find out how they work and their key differences by checking out this short guide. 

Payday Loan Vs. Cash Advance

Getting a loan in Singapore is easy and you’ll find many options among banks, financial institutions, and licensed moneylenders. If you are met with sudden financial emergencies, payday loans and cash advances are options you can look into. 

The key difference between a payday loan and a cash advance is the repayment terms. While it is true that both are short-term loans, credit card cash advances may be paid for longer than a month. Still, it is best to pay balances earlier to avoid accruing higher interest fees.  

The table below will show some basic features and how the two options differ.

At a Glance:

	Cash Advance	Payday Loan
Loan Amount	20% to 30% of your card’s available limit	Up to one month’s worth of your salary
Interest Rate	APR of 29% to 30%	Varies on the payday lenderLicensed moneylenders: Up to 4%
Repayment	Advisable to be paid in full due to the high interest	On your next payday or within one month
Charges and Fees	Cash advance fees: between S$5 to S$10Upfront fees: the greater of 6% or S$15Banking fees: depending on bankFinance charges: Interest: accrues immediately depending on amount	Licensed moneylenders: not exceeding 10% of the principal amount
Credit Score	Required	Not required
Disbursement Speed	Get your cash instantly via digibank, ATM, or the branch	Get your cash as soon as the contract has been signed, usually within the day.

• Loan Amount

The amount you can take with a cash advance depends on your card issuer and your FICO score. Some banks initially set a cash advance amount of around 20 to 30 percent of your credit card limit. With payday loans, you can get the same amount as your monthly salary.  

• Interest

The average APR of cash advances is around 29% which is higher than your regular credit card purchases’ APR. For payday loans, some banks may charge as high as 24% for just two weeks. A licensed moneylender only charges interest rates up to 4%.    

• Repayment

If you pay only the minimum payment required on your statement, your provider will apply the payment to your purchases. To be able to pay your cash advance balance, you should pay more than the minimum required. Or better yet, pay cash advance in full immediately on the following statement of account.

Meanwhile, payday loans are payable on a set due date, specifically the next payday or until a month. 

• Charges or Fees

A credit card cash advance is even made expensive with other charges it may come with. Aside from the high APR, banks also charge other fees, such as upfront fees and finance charges. 

On the other hand, with payday loans from licensed moneylenders, you’ll only be  charged a one-time fee not exceeding 10% of your loan amount. While the maximum late payment fee is charged at S$60 per month.

• Credit Score

The higher the credit score, the higher the cash advance you can get. Some banks use the FICO score to set this amount. Payday lenders and loan providers like licensed moneylenders do not require a credit check for this loan. 

• Disbursement Speed

You can instantly get your cash advance fund through an ATM. If you have received a convenience check with your card, you can also use this check to get your funds and transfer them to your bank account. 

Payday loans from licensed moneylenders are also quick, and once your loan is approved, you may get your cash within the day in the lender’s office.

What Are Other Alternatives?

Cash advances and payday loans are a good deal when you fall short of cash. Yet, there are many alternatives that you can also consider in Singapore. 

• Credit Union Loans

If you are an existing credit union member, you might as well look at some of their offers. They offer payday alternative loans in small amounts and a lower interest rate. Some credit unions may offer up to two times your total member savings.

• Pawn Loans

A pawnshop loan is a no-credit-check option where you can use your valuables like jewelry in exchange for cash. The pawnshop will assess your item’s value and let you know how much they can give you as a loan. You can get 60 to 80% of your collateral’s value. 

• Personal Loan

Generally, a personal loan is cheaper than payday loans and cash advances. Personal loans from banks may be a little more complicated to apply for due to stringent requirements, but it is a safe way to access credit. Banks will also look at credit scores when approving personal loans. 

Alternatively, you can apply for personal loans from licensed moneylenders and get up to six times your monthly income. 

Closing

Payday loans and cash advances could solve financial emergencies quickly. Before taking on any loan, ensure you are financially ready to manage monthly repayments. Shop around reliable lenders and check If you are eligible for other alternatives.  

Key Takeaways

• Get a payday loan if you need a small amount that can tide you over the next paycheck.
• Use only a cash advance if you have no other option, but make sure to pay these balances immediately.
• Licensed moneylenders offer payday loans with no high credit score required and offer lower interest rates up to 4%.

Short on cash? Raffles Credit, a reliable and trusted licensed moneylender in Singapore, got you covered! Acquiring a payday loan is fast and easy. Fill up our quick form now and get your loan application approved in as fast as 30 minutes, and get your cash on the same day!