Differences between payday loans vs credit card cash advances

Differences between payday loans vs credit card cash advance

Singapore – If you have been researching and comparing credit card cash advances and payday loans, you might get confused between their various offerings.

Credit card companies are stiffening up the competition as they compete amongst themselves and the different moneylenders to offer fast cash loans to people.

Getting loans is easy in Singapore with different schemes for different package offerings. Banks, licensed moneylenders and a variant of loan companies all offer a type of loan for different consumers. So let’s narrow down to the loan types of payday loans and credit card cash advances.

Let’s look at payday loans

Basically, when you are looking for personal loans in general, you might have seen different terms used interchangeably; payday loans, personal loan, cash advance, fast loan. In this article we make reference to payday loans which is part of a personal loan type.

The definition of a payday loan – A payday loan is referred to as a short-term loan that allows a person to take up a loan amount based on their salary. There’s a minimum monthly income cap depending on the moneylender rules and borrowers who have a much higher verifiable income salary would be able to borrow more money.

Payday loans (also called “payday advances” and “personal loans”) are a subset of unsecured loans, meaning there is no collaterals needed. Payday loans are granted based on your income and are tailored to the borrower’s ability to pay back in a certain timeframe. Sometimes payday loans can be paid back in multiple split payments, but are required to pay back the entire amount with the agreed interest.

Licensed moneylenders provide payday loans and the interest rates may vary accordingly. One of the greatest advantages of payday loans would be negotiable or adjustable repayment plans. This will greatly help you in terms of money management as one can better plan their finances.

Another great advance that legit moneylenders offer are simple policies on their rates. Only an interest rate is charged on your loan amount with zero hidden charges.

What about credit card cash advances?

Credit card cash advances in Singapore

Credit card cash advances in Singapore. A look into the definition and misconceptions on credit card cash advances. The things to look out for.

Credit card cash advance is based on your available credit limit on a credit card rather than your monthly income. A credit card cash advance is generally treated like a purchase made with a credit card and the repayment terms are strict.

A cash advance on a credit card may or may not offer you a better deal than a payday loan depending on your own credit ratings and whether you are credit qualified. Some credit card companies charge higher interest on cash advances as compared to payday loans offered by moneylenders.

Cash advance loans comes with your monthly credit card bills and are to be repaid accordingly. Interest is compounded daily and they require a substantial application fee when you request for a loan.

There are hidden charges on loan amounts which could be transaction fees, late payment fees, card fees, withdrawal fees, setup fees, bank service fees which the borrower might not be aware of.

To make matters even worse, many credit card companies require you to pay off any existing non-cash-advance balance (the normal purchase you make) that you might be having on your card. This means that they force you to pay up the amount with lower interest rate first, while the cash advance balance remains untouched, with the amount owed increasing and compounding interest.

Credit Card cash advance fake cheque technique

Credit Card cash advance fake cheque technique

Ever received a “credit card cheques” from credit card companies in your mailbox? Cheques offering a big lump sum to you? This is one of the biggest misconceptions faced by people. These “cheques” are treated as credit card cash advances by credit companies and it comes with all the accompanying disadvantages. People will feel it’s easy credit, but not realizing the multiple charges on such a loan.

In Singapore, credit companies cap the maximum loan amount based on their credit limits. Cash advances charge hefty interest or finance charges from day one of the loan till the day payment is made in full.

They do have their advantages, whereby the borrower can withdraw cash at the credit company’s ATM or request for loans to be transferred to the borrower’s own bank account. Some offer loan application via phone (cash-on-call) or SMS.

As a rule of thumb, hefty charges can be avoided if you pay the full amount on your credit card statement every month. Ask your card issuer to explain how interest is computed and to provide you with a case study loan amount.

Comparison and Outcome. Choose Wisely.

So what’s the best course of action for a borrower? At times, payday loans could have higher interest rates than credit card cash advances. This is due to moneylenders face higher risks of not being repaid.

However, if you have been a repeat customer with a great history of prompt repayment, licensed moneylenders would usually offer a better rate or repayment policy for you. You could also discuss with the loan officers and they will advise on  a repayment plan for you.

Payday loans offer great flexibility in terms of repayment policy and if repayment time periods are a consideration for you, you are much better of with payday loans. Payday loans also offer no hidden charges and allow lower-income people who cannot get a credit card to take up a loan.

Choose wisely based on your loan requirements and make the right choice for you. Regardless of which loan offering you are after, do your research wisely, check reviews and check out the competitors.

Should you require better advice or have any doubts on loan offerings, feel free to drop a message to us or a phone call and our friendly loan officer will service you.

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