Personal Loans Vs. Credit Card Cash Advance: Which One Is Better?

Need extra funds? Discover if personal loans or credit card cash advances best suit your financial situation.
personal loans vs credit card cash advance decision
J. Michaels
Author: J. Michaels
personal loans vs credit card cash advance decision

Are you in need of some extra cash? When it comes to accessing funds quickly, it often comes down to personal loans vs. credit card cash advances. But which one is better for your situation? Let’s break it down for you.

A personal loan is a lump sum of money offered by a lender that you must repay with interest on a set schedule. It’s commonly used for things like debt consolidation, car purchases, home repairs, and emergency expenses.

On the other hand, a credit card cash advance is a short-term loan obtained by withdrawing money from an ATM or visiting a brick-and-mortar location. It’s suitable for those who need quick access to funds but may have a lower credit score.

Ultimately, the decision between these two options depends on factors like urgency, your credit profile, and the amount needed.

Keep reading to learn more about these options and alternative ways to get quick cash.

Key Takeaways

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Personal Loan Overview

If you’re looking for a way to access funds for various purposes, like debt consolidation or emergency expenses, a personal loan might be just what you need.

Personal loans offer several benefits compared to credit card cash advances.

With personal loans, you can borrow a lump sum of money and repay it in fixed monthly payments over a specific period of time. This allows for better budgeting and planning.

Additionally, they often have lower interest rates compared to credit card cash advances, which can save you money in the long run.

To qualify for a personal loan, lenders will typically consider your credit score and debt-to-income ratio.

Personal loans are best used for larger expenses or consolidating high-interest debt into one manageable payment.

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Credit Card Cash Advance Overview

Credit Card Cash Advance

A credit card cash advance is a small, short-term loan provided by your credit card issuer. These advances can be withdrawn at an ATM, by check, or at a bank using your credit card.

The amount of cash you can withdraw is a small fraction of the credit limit on your card. Here are some key features about cash advances to consider:

Cash advances can be a great way to get quick cash, but the amount of cash you can withdraw is limited, and the terms of the loan are not typically favorable. Keep this in mind when deciding what is best for your situation.

Differences Between Personal Loans and Credit Card Cash Advances

When it comes to repayment terms, personal loans offer more flexibility with terms ranging from one to seven years, depending on the provider.

On the other hand, credit card cash advances usually require immediate repayment, often on your next payday.

In terms of interest rates, personal loans generally have lower rates averaging around 10%, while credit card advances can carry high APRs around 22% or even higher.

Credit score requirements are typically more lenient for cash advances, making them potentially easier to obtain if you have a low credit score. However, there are select personal loan lenders for people with lower credit scores.

Loan limits also differ, with personal loans offering higher limits up to $50,000 compared to specific percentages of your credit limit for cash advances.

Lastly, the purpose of the loan may influence your decision as personal loans can be used for various purposes such as debt consolidation or home repairs, while credit card advances are better suited for emergency expenses or purchases that can’t wait for loan approval.

Factors to Consider when Choosing between a Personal Loan and a Credit Card Cash Advance

When deciding between a personal loan and a credit card cash advance, there are several factors to consider.

Firstly, if you have good credit, a personal loan may be the better choice. With good or excellent credit scores, you are likely to receive lower interest rates on a personal loan compared to a cash advance. Additionally, shopping around for different lenders can help you secure even lower interest rates and fees.

On the other hand, if immediate access to funds is crucial, a cash advance might be more suitable. Cash advances allow you to withdraw money from an ATM instantly. However, it’s important to note that cash advances often come with high fees and should only be considered if you can pay off the loan quickly.

In summary:

Specs

Pros

Cons

Personal Loans

A loan taken out with fixed monthly payments over a set period.
Lower interest rates for individuals with good credit.
It may take longer for approval and disbursement of funds.

Cash Advances

Borrowing against your credit card limit with immediate access to funds.

Instant access to funds in urgent situations

High fees and potential difficulty paying off the loan on time.

Personal Loans

Specs

A loan taken out with fixed monthly payments over a set period.

Pros

Lower interest rates for individuals with good credit.

Cons

It may take longer for approval and disbursement of funds.

Cash Advances

Specs

Borrowing against your credit card limit with immediate access to funds.

Pros

Instant access to funds in urgent situations

Cons

High fees and potential difficulty paying off the loan on time.

Alternatives for Getting a Quick Cash Loan

If neither loan type works for you, there are other options available to get quick cash.

One alternative is to consider applying for a 0% intro APR credit card. Although it may not provide immediate cash, this type of credit card can help you avoid paying interest on emergency expenses for a certain period of time.

Another option is to join lending circles operated by nonprofit organizations. These groups allow borrowers to borrow money from each other at low or no interest, and some even report payments to credit bureaus, helping you build your credit score.

Additionally, you can explore financial assistance programs that offer targeted aid for utility bills or rent payments.

Lastly, if possible, borrowing from family or friends can be an option as well.

It’s important to note that payday loans, title loans, and pawn shop loans should be avoided due to their high interest rates and potential debt trap they create.

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