Salary Advance vs Personal Loan – Choose a Loan that Works for You

A fixed salary offers financial security that ensures your monthly needs are met. However, rising inflation rates may make it challenging to get through the entire month. As per an EY-Refyne survey, more than 80% of employees use up their entire salary before it is time to receive the next month’s salary. 

This can make it really difficult to tide over sudden expenses that come with medical or personal emergencies. However, the good news is that you can rely on certain credit facilities in such situations. Getting your salary in advance, for instance, or a personal loan are some of the commonly preferred options. 

But how do you choose between the two options? Read on to understand the difference between a salary advance and a personal loan and decide accordingly. 

Definition of Salary Advance

A salary advance is a short-term loan facility you can avail of to address cash shortages before you get your next salary payment. You can get these funds from or through your employer. The amount is then deducted from your future salaries.

Some lenders also provide the facility of a salary advance loan, wherein you can get funds and repay it over a short-term tenure. A vital feature of this credit facility is that it is offered only to salaried individuals and is based on your salary amount.

Apply Personal Loan For Salaried Employee

Definition of a Personal Loan

A personal loan is a popular credit facility offered by most financial institutions. Personal loans are available to both salaried and self-employed individuals. Your maximum loan amount can go up to ₹50 lakhs or more, depending on your eligibility and the lender’s terms. 

Some features of a personal loan include the following:

• Lenders offer tenures of up to 60 months
• You make monthly payments in the form of EMIs (with interest)
• Most lenders prefer a score above 700 or 750 for approval

Disclaimer: Note that the loan terms associated with a personal loan vary with issuers.

Difference Between a Salary Advance and a Personal Loan

Given below is a tabular overview of a getting your salar advance vs a personal loan:

Salary Advance	Personal Loan
Available only to salaried individuals	Available for both self-employed and salaried individuals
The cash advance amount depends on your salary and the organisation or lender	The loan amount depends on your eligibility and the lender
Minimal requirements for eligibility	May have simple to stringent eligibility and credit score requirements

Benefits of Personal Loan Over Salary Advance

If you choose a personal loan over a salary advance, these are the few advantages you will get. 

• Larger Loans: With a personal loan, you may get a higher amount as compared to salary advance, depending on your financial profile. 
• Extended Repayment Tenures: Salary advance has to be paid in weeks or months. On the other hand, you can repay a personal loan over various years.
• Building Credit Score: Repaying your personal loan responsibly will help enhance your credit score.

Salary Advance or Personal Loan: How to Choose

To know how to choose between the two, simply comparing a personal loan with a salary advance isn’t enough. Here are a few pertinent questions to ask when deciding whether a personal loan or salary advance is right.

• How long can you wait?

You can get instant cash via a personal loan with the right lender, whereas a salary advance can take a couple of days to process.

• What is the loan amount you need?

Salary advances primarily depend on your salary, whereas a personal loan usually offers a larger quantum of funding.

• What is the preferred repayment route?

A salary advance deducts the outstanding amount from your future salaries, which can strain your finances if your fixed expenses are high. If you opt for a personal loan, you can repay in instalments over a tenure of your choice.

Apart from the above, factor in the total cost of borrowing while deciding whether to avail of a personal loan or a salary advance. 

Conclusion

Choosing between a personal loan and a salary advance depends on your usage requirements. Salary advances provide quick access to a portion of your pay, while personal loans offer larger amounts and longer repayment terms.

If you decide to go ahead with a personal loan, you can opt for a Fibe Instant Cash Loan of up to ₹5 lakhs. Get these funds with minimal documentation and enjoy competitive interest rates and zero foreclosure charges. Get started by downloading our Personal Loan App today!

FAQs on Salary Advance Vs Personal Loan

Is salary advance a loan?

If you are getting your salary in advance from your employer, it is not considered a loan as there is usually no interest you need to pay. However, this depends on your employer’s policies. If you are getting a salary loan from a lender, then interest applies, and it is considered a credit facility. 

What are the repayment terms for an advance salary loan?

The repayment period of a salary loan is comparatively less than that of a personal loan, generally a month. However, it may vary depending on the lender and can go up to a few months. At Fibe, the repayment tenure is flexible, starting from 3 months and going up to 36 months.

Is advance salary taxable?

Yes, your advance salary loan is taxable for the year in which you avail of the facility.