What are the differences between personal loans and cash advances?

Answer 1

A personal loan can be defined as a contract where a lender immediately provides the borrower with a sum of money for which the borrower will pay back that value to the lender in a specified period of time, typically with interest.

A cash advance can be defined as a loan taken from an existing line of credit (typically a credit card) that is to be paid back according to the terms and conditions of the existing line of credit.

So some of the differences between a personal loan (PL) and a cash advance (CA) are summarized as follows:

* CA terms are based on the underlying line of credit whereas PLs have their own specific terms and conditions

* CA accrues interest immediately when taken whereas most PLs do not

* CA has upfront fees of between 3% and 10% of the amount advanced whereas PL fees tend to be much lower (between 0% and 3%)

* CA interest rates run from 15% to 28% whereas PL rates tend to be lower (from 7% to 20%)

* CAs do not require a reason whereas PLs require a reason

* CAs do not require credit evaluation whereas PLs result in a hard check with the bureaus and go through underwriting

* CAs do not add transaction lines to the credit report whereas PLs result in a new account generated in the credit report