Cash Advance Loans vs Traditional Loans

So what's the difference between a cash advance loan and a more traditional loan that you can get from a bank or other lender? There are quite a few differences and benefits you can expect including convenience.

Personal Loans from a Financial Institution

Trying to get an unsecured loan from a bank or credit union means going through an exhaustive credit application process. Unlike cash advance loans, loans from a traditional lender rely almost exclusively on your credit score and credit reports in order to make the decision as to how much you can borrow and, whether or not you can have the loan at all. These loans have the potential to be significantly larger than those available from cash advance lenders and at a lower rate, but over a substantially longer period of time as well, which means you could be in debt for years on their proposed repayment schedule. The strict credit requirements are the main reason why many people do not want to attempt getting a loan through a traditional institution, but timing is also an issue. While online cash advance lenders could have money in your account for you to use in as little as 24 hours, traditional bank loan approval and disbursement will usually take a minimum of one week and may be as long as a month depending on the size of the loan.

If your credit is not up to par in order to receive a loan from a traditional lender such as a bank, then you may consider a secured loan where you put up some property or an item (such as your car) as collateral for the loan. This will substantially increase the weight of your loan request and, under the right circumstances just about guarantee that you will get a loan from the bank. The downside to secured loans is the risk that you will take with the loan if you are unable to repay the debt in a timely manner. This can lead to seizure of your property in addition to the ruining of your credit score.

Online Cash Advances

The primary difference between the loan you can get from a traditional lender and a cash advance lender is the way the repayment of the loan is handled. While traditional loan terms usually last for a year or more, cash advances for your personal finance needs tend to be due in as little as one week but up to six months depending on the size of your loan, how much you borrow and your state's guidelines. In addition, you don't have to worry about figuring out the annual percentage rate (APR) due on your loan and how much the loan is costing you. Most payday lenders charge a flat amount based on the amount you borrow. For example, if you borrow $400 for two weeks and are told that your loan is $15 per $100 you borrow, then you will have to repay $460. These formulae are much easier to figure out and result in a more simplified loan application form than what you will see at a traditional bank or credit union.

If you want to know more about the process itself, look over the information we have given about understanding the process.