Both of them have their own unique pros and cons
Each is best suited for different circumstances
Imagine being strapped for cash to cover some immediate needs. We’ve all been there; it’s not a very pleasant position to be in. However, there are two major options you can pursue to secure funds to meet your needs: personal loans and cash advances.
Between these two, which is better? Which should you choose when you need funds?
Read on to find out.
What are personal loans and cash advances?
A personal loan refers to a fund that you borrow from a lender and pay back gradually by making the necessary payments in installments. Before a lender grants you a personal loan, they’ll typically check your credit report and credit score to determine your creditworthiness.
On the other hand, a cash advance is a loan available through credit card issuers that typically allows the cardholder to withdraw a specific amount of cash. The cash advance limit is normally noted on the credit card statement and is significantly lower than the card limit.
A cash advance has high interest rates and fees but also makes for much quicker funding.
Which is the better option?
Determining which option is better between a personal loan and a cash advance depends on your immediate needs and circumstances. Each has specific benefits that make it more attractive than the other in certain situations. Let’s consider them.
A cash advance is the go-to option when you need cash instantly. Since you can make the withdrawal from an ATM, it comes in handy if you find yourself in a fix and you need cash right now. This is especially useful if you’re in a remote location. You don’t have to have access to a bank for a cash advance.
If you can pay off the advance quickly within a few weeks or months, by all means, jump on the cash advance train. High interest rates won’t be a factor for you if you clear the debt quickly.
Of particular benefit with a cash advance is the fact that it’s great if you have a reasonable plan for paying the money back within the short term.
However, a personal loan is better if you don’t have a credit card or you don’t want to deal with the high interest rates that come with a cash advance. Personal loans don’t come with high interest, outrageous fees, or the withdrawal limits that come with cash advances. Research shows that interest rates for personal loans are currently at an all-time low. In fact, with a personal loan, you might even be able to secure an interest rate discount if you’ve developed a strong relationship with your lender.
Also, the repayment period is longer than that of a cash advance, allowing you to handle it along with other financial commitments without breaking the bank.
If you have good credit, we strongly recommend that you choose a personal loan when possible. Lenders are more than willing to offer their financial assistance to those who are creditworthy.
In summary, both personal loans and cash advances are helpful, but they each work better in different situations. Identify what your needs and circumstances are before making a choice and make the most of the financial assistance that lenders can provide.