There are some similarities between a Payday Loan and a Cash Advance, however, they are different in their collateral, credit qualifications, and repayment terms.
A Payday loan is a short term loan that is due when the borrower’s next paycheck arrives which is usually a two week term. With a payday loan, the borrower writes a postdated check to the lender in the full amount of the loan plus the finance fees. On the check’s maturity date, the borrower is expected to repay the loan either by writing a traditional check or having the lender withdraw the amount from the borrower’s checking account automatically.
The main qualifications of acquiring a payday loan are usually based on the borrower’s employment and having a checking account, not based on credit, therefore, making these loans easier to obtain because it does not depend on having good credit. Payday loans usually do not depend on bad credit.
Borrowers can visit a physical payday loan and fill out a paper application or go to a online payday loan website and fill out an online application and in many cases, obtain an approval the same day and have cash deposited in their bank account within one business day.
A cash advance is a cash withdrawal drawn again a borrower’s credit card with the limit being the limit of the credit card or a percentage of it. Cash advances done on a credit card usually have a fee and at an interest rate that is higher than made during a store purchase. Cash advances do not have an interest-free period like credit purchases which usually gives the borrower the option to pay the full credit balance in full every month without a fee. Borrowers can receive a cash advance at any bank that issues that type of credit card without a PIN number.