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Personal Loan vs. Payday Advance: Which is Better?
So youve found yourself in a bit of a financial bind, and need a little help to get through it. Dont be embarrassed; its happened to just about everyone at some point or another. What you need to do now is figure out how to deal with it in the best way.
And if your credit cards are maxed out, and your family members or friends cant help, there are only a couple of real options: 1) a personal unsecured loan, or 2) a payday advance.
Both Personal Loans and Payday Advances may help get you out of a short term financial jam. So now comes the very valid question: Which is better? Well, that can depend a lot on your personal situation, and what you hope to get out of the situation (besides the obvious cash). So lets take a quick look at both.
PAYDAY ADVANCE (LOAN): Its a cash advance, not a loan!
Many people refer to this option as a payday loan. However, the more accurate description is “payday advance.” It is not a loan. It is a cash advance with a large fee. You write a check to the Payday Advance company. They typically give you 80% of the check amount in cash, and then they hold the check until your “payday” which is typically when the money to cover the full amount of the check will be in your checking account. The Payday Advance company then deposits the check and keeps the 20% as their fee for the cash advance.
Odds are youve seen the brightly lit signs of a Payday Advance shop next to some liquor store or in a strip mall, or you have seen them advertised on TV, in e-mails or in banner ads online. The amount of money Payday Advance companies can provide is limited by state law and is typically a maximum of about $500. In California, the maximum advance is $300.
So, the advance may be enough to get you through small cash emergencies when youre between paychecks. If you need a quick couple of hundred bucks for groceries, if your cars alternator goes out, you chip a tooth, etc a Payday Advance might be a viable, but very expensive, option.
However, very often a Payday Advance is only enough to delay the cash emergency for a few weeks, and not enough to get you totally out of it. As a result many people find themselves getting multiple Payday Advances, which can be extremely expensive when each advance costs you a 20% fee. Ten payday advances over the course of year would equal an effective interest rate of over 200%! A very expensive way to go.
And, since a payday advance is not an actual loan, it can do nothing to help your credit status.
PERSONAL LOANS: Get much more money at a much lower cost.
A personal loan is actually a loan that you repay over time via affordable monthly payments. You can get much more cash than you get from those payday advance places – and you dont pay a 20% fee over two weeks!
Of course, if your credit isnt perfect, your bank will turn you down very quickly. However, CashCall makes personal unsecured loans, up to $5,000, to people in a cash jam, who have less than perfect credit! This is the kind of money that can really help if youre facing major car repairs, medical issues, looming bills, etc. The loan money is placed directly into your checking account in about a day, and there are no limitations on how you can use your cash. Its up to you.
A personal unsecured loan from a company like CashCall doesnt require any collateral or security. You dont need to be a homeowner, you dont need to turn over the title to your car you dont need to do anything except apply, and provide some simple paperwork. The cash can be in your checking account the next day.
You use the money to get out of the jam youre in. And then, you can either make the affordable monthly payments or repay the loan when you can. There are never any fees or penalties for repaying the loan early, and you will minimize the interest you pay by repaying the loan sooner rather than later.
Another benefit of a personal loan from CashCall is that you can actually improve your credit score by making your monthly payments on time. Thats right, you can rebuild your credit because CashCall provides all three credit agencies (Experian, Transunion, and Equifax) with your payment information because it is an actual loan, not a cash advance! And in the long term, thats the kind of thing that can truly get you back on your feet.
CashCall Personal Loans offers high-interest-bearing, unsecured term loans to qualified borrowers who typically use the loans for one-time purchases and debt consolidation. These loans of up to $5,000 are processed entirely over the Internet, phone and fax, and funds are wired into the borrowers checking account typically within 24 hours. CashCall Personal Loans are a good alternative to Payday Loans for borrowers. While interest rates are high, they are typically much lower than those of payday lenders, and CashCall Personal Loans have the potential to help customers rebuild their credit score by making payments on time.
The Most Popular Uses For A Personal Loan
The number of people taking out personal loans has risen dramatically over the last ten or fifteen years, but what are the reasons for this? In this article we’ll look at the main uses of the loans that we take out.
Debt Consolidation
This is possibly the biggest single reason people take out a personal loan, with billions being lent to help people sort out their finances. The basic idea is to take out one single loan that you use to pay off all your other debts, leaving you with just one repayment to make. Not only does this make your financial life simpler and more easily managed, but if done properly the result should be that your debt is costing you less overall to service each month.
New Car
Although there are many different kinds of auto finance available, from basic car loans to vehicle plus finance packages, many of these deals work out to be quite expensive, and are often suited to people with poorer credit ratings. A normal personal loan, with a lower interest rate and less restrictions, can be a better option for funding a vehicle purchase for many people. The key benefit is that you’re free to spend the loan amount on any car from any dealer, or even buy privately – an option not usually open to users of dedicated auto finance packages.
Home Improvements
The extreme rise in property prices over the last decade or so has left many people with large amounts of equity in their home. This means that their house is worth far more than the mortgage still owed on it. For some homeowners it can make good sense to ‘cash in’ some of this equity in the form of a loan, using the money to reinvest in their property by improving it. This can mean extra building works, improvements to faciilities such as bathrooms and kitchens, landscape gardening, or any other costly exercise that will ultimately increase the value of a property even further in the coming years.
Vacation or Travel
Also given the large amounts of equity many people have, a popular option is to free up some of this cash to finance a once in a lifetime vacation, cruise, or other kind of expensive travel. It’s not generally recommended that you use your home as collateral for this kind of loan spending, as you’ll be risking the future of your home with little to show for it once the vacation is over. An unsecured personal loan, however, is an ideal way of spreading the cost of an unforgettable experience over a year or two.
Wedding
One final popular reason for taking out a personal loan is to pay for a wedding, either your own or a child’s. Weddings these days can be incredibly expensive, usually running well into four or even five figures, and not many people have this kind of money in reserve. Naturally, a wedding day should be a day to remember always, and so many people feel it’s well worth the cost of taking out a loan in order to make the day as perfect as possible. The funds will also be useful in paying for a great honeymoon, and even providing a few household essentials when moving into a first home.