Instant Loan vs. Salary Advance: Which is the Better Option for Salaried Workers?

May 22, 2024
 |  1 min read

Introduction

In the quickly changing financial world, you may need urgent cash loans to manage unexpected expenses or bridge the gap until your next paycheck. Two popular options for handling situations like these are instant personal loan online for salaried and salary advances.

Both these options can provide quick cash, but they are different in many ways. Let us learn in detail about what are instant loans and salary advances, and how do they differ.

What are Instant Loans?

An instant personal loan online for salaried is a short-term, unsecured loan that provides immediate access to funds. Banks, non-banking financial companies (NBFCs), and online lenders typically offer these loans.

What is a Salary Advance?

Salary advances, on the other hand, are urgent cash loans against an employee’s upcoming salary. This service is typically offered by employers or third-party providers in collaboration with employers.

Comparison of Instant Loans and Salary Advances

After understanding the basics of both loan types, let’s compare them based on several crucial factors:

  1. Speed: Instant loans are faster due to their digital processes. Salary advances depend on employer policies.
  1. Cost: Instant loans have higher interest rates. Salary advances can have low-interest as per the employer’s policy.
  1. Flexibility: Instant loans are flexible regarding repayment time. Salary advances require repayment by the next payday.
  1. Credit Score: Instant loans can impact credit scores depending on repayment behaviour. Salary advances do not typically affect credit scores.
  1. Loan Amount: Instant loans can offer higher loan amounts than salary advances.
  1. Eligibility: Salary advances are only available to employed individuals. Instant loans are available to a broader audience.
  1. Repayment: Salary advances offer automatic repayment by salary deduction. Instant loans require the borrower to manage repayments actively.

When to Choose an Instant Loan?

While both provide quick access to funds, there are specific situations where an instant personal loan online for salaried might be more advantageous. Let’s understand when should salaried workers consider using instant loans instead of salary advances.

  • When the Required Loan Amount is Large: Instant loans typically offer higher loan amounts than salary advances.
  • For Longer Repayment Terms: Instant loans usually have more extended repayment periods.
  • When Credit Building is a Priority: Urgent cash loans, unlike salary advances, are usually reported to credit bureaus.
  • When Speed and Convenience are Crucial: Instant loans often leverage fully digital processes, which can sometimes be faster.

When to Choose a Salary Advance

Here’s a quick summary of when to consider a salary advance loan:

  • Small, immediate expenses or needs arising before payday.
  • When you have a stable job and reliable income.
  • Avoid high-interest debt.
  • Poor or limited credit history.
  • Quick and easy application process with minimal documentation.

Factors to Consider

You may wonder what are the repayment terms and conditions for instant loans vs. salary advances for salaried employees. Here are the essential factors to consider when deciding which option is best for you.

  1. Loan amount
  2. Speed of access
  3. Interest rates and fees
  4. Repayment terms
  5. Impact on credit score
  6. Eligibility
  7. Approval process
  8. Ease of repayment

Conclusion

Both instant loans and salary advances give you valuable solutions for your quick financial needs. An instant personal loan online for salaried can offer higher amounts and more flexible repayment terms. But it can impact credit scores. Salary advances are affordable but are limited in amount and are not very flexible in repayment.

Responsible borrowing from a trusted instant loan app like mPokket and careful financial planning are vital to maximising these tools without jeopardising long-term financial health.

Gaurav Jalan

Gaurav Jalan is the Founder and CEO of mPokket, a digital lending platform serving underserved Indian youth. He leverages technology and experience to deliver cost-effective credit to marginalized populations. In his role, he provides strategic direction and oversees execution to fulfill mPokket's mission.