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

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15 November 2022

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

With inflation (and expenses) increasing consistently, it is challenging for folks to pull through the entire month with their salary. Receiving a fixed salary at the end of every month should ideally guarantee financial security, but sometimes, there is a possibility of you facing a shortage of money due to unseen situations. In such scenarios, they often turn to some form of credit, which assists in dealing with any unplanned or emergencies such as sudden medical expenses, a family occasion, or even relocating to a new city.

You would have received advice on planning in advance and saving 20% of your monthly income as it might probably be enough to meet emergency circumstances. But what if the money you saved is not enough to cover this immediate need? 

How would you approach this situation? An instant personal loan? But most lending institutions provide instant personal loans for a minimum of 12 months. 

So, credit card? Or borrow from a friend? 

People often find themselves borrowing money from home despite living very frugal lifestyles. This is largely because the concept of an instant personal loan either is unaffordable for them or cannot be sanctioned to them early in their careers. Admittedly, getting an instant personal loan in the early stages of your career without high rates of interest is difficult. 

However, we now have a better and simpler alternative in salary advance loans. But should you choose a salary advance over personal loan? When should you choose a salary advance and when is it better to go for a personal loan? Let’s find out.

What is a Salary Advance Loan?

With the rise of new-age borrowing sources, the consumer finance space is delivering a wide range of options across segments to its customers. Salary advance loans and instant personal loans are new-age borrowing options for retail consumers who offer credit without collateral to salaried professionals.

The concept of advance against salary has been growing in popularity for quite some time now. The term refers to borrowers taking out small amounts of short-term loans, often near the end of the month, in order to meet expenses. The salary advance loan is recovered in instalments at very low-interest rates. With the concept of an advance against salary catching up slowly, many leading apps like Fibe are helping bridge the gap between employees and their expenses

Salary advance apps have also done away with the tedious and lengthy paperwork accompanying the loans sanctioned at banks.

What is the difference between an instant Personal loan and a Salary Advance?

Salary advance loans is a short-term loan that is extended to salaried professionals. It can be used for any purpose, such as medical expenses, covering huge expenditures, or any other emergency.

A loan is an amount borrowed for long-term financial needs – a form of debt that is repaid over a long period of time. Loans serve various needs – for investments like a car, a house, or even educational expenses. An instant advance against salary, on the other hand, is used for short-term financial needs. This amount, in the traditional sense of the term, is deducted by the employer from the employee’s salary itself. Sometimes, banks also offer salary advance loans with a repayment cap of one year. 

For sanctioning an instant personal loan, banks look into your credit score and financial profile. Even then, the interest rate may not be favourable. Salary loans, though, come with very low interest. Salary advance loans are ideal for cash-strapped individuals who want quick loans to fund sudden expenses until their salary is credited. But should you choose a salary advance over a personal loan? Let’s find out!

Why Choose a Salary Advance Loan?

#1 Age and income matter when you apply for a loan

Getting a loan sanctioned from a bank relies on a number of factors – including your age and income. If your income is on the lower side, as it may be at the beginning of your career, banks may be hesitant to lend you money. Low-income results in you being charged high-interest rates or having to submit more collateral. On the other hand, a salary advance factors in many other parameters to arrive at a more accurate and holistic view of your credibility as a borrower.

#2 Taking a salary advance is more flexible

The procedure of taking salary loans has always been more convenient with its procedures and is flexible with the amount and interest rates as compared to a loan. Your salary advance loan is normally deducted from your succeeding payslips, making the repayment easier. You don’t need to save up the money separately to repay the advance. 

Advance salary apps like Fibe offer a dynamic borrowing limit, depending on the kind of expenditure incurred. A salary advance gives you that ‘extra’ money to sail through tough times.  You can also borrow any amount and it can be paid off by the succeeding month itself.

#3 An advance against salary has quicker disbursal

Getting a loan sanctioned at a bank can take you anywhere from weeks to months and can be a tedious task with excessive paperwork. Loans require more paperwork and are also time-consuming. Banks may take 7-15 working days to approve a loan and transfer the amount. Advance against salary don’t require much time or paperwork, though, as the entire process is handled online. 

During times of emergency, then, they are by far the best option.  All you need to do is, download the Fibe app, enter the required details and wait for 8 – 24 hours for approval and easy money transfer. Salary loans are a quicker option since it does not involve any middleman. There are a number of apps available today which can help you secure salary loans.

#4 Rates of Interest

The rate of interest levied on loans depends on various factors – many of which young employees may lack since they’ve just begun their financial journey. This results in high-interest rates or great collateral demands. Salary advances, on the other hand, charge lower rates of interest. Additionally, they levy interest only on the money that is drawn and used, as opposed to banks where the interest is levied on the accumulated amount as soon as it is disbursed.

Why Choose Personal Loan?

#1 You need a decent credit score for a loan

A loan from traditional financial institutions almost certainly requires a credit score and a good one at that. If your credit score is high, the interest on your loan will be low. Most young employees cannot take loans because they have no credit and need to build it. Taking any form of credit helps build your credit score and hence, taking a personal loan should also boost your credit score.

#2 Easy Repayment

The repayment tenure of an instant personal loan can put you in debt for as long as 5 years. Non-repayment can affect your credit score and may also lead to the rejection of your future loan application. 

A traditional personal loan from a bank often comes with strict and stringent payment dates regulated by the bank. The lack of money at such times often results in higher EMIs (equated monthly instalments) with every succeeding defaulted month. Personal Loan from Fibe has an easy repayment scheme. More often than not, they are directly deducted from your paycheque itself. If not, the repayment schemes are aligned with the payday to avoid any lack of cash during the repayment period.

#3 Unexpected Emergencies

Unpredictable situations like sudden sickness or hospitalisation can throw our expenses off track. During such times, instead of breaking into fixed deposits or taking an emergency loan with a high-interest rate, personal loans can seem like a far better option. This helps you avoid huge expenditure cuts in the future. 

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Personal loans help you pay off a large and sudden amount of money, be it hospital bills, credit card bills, or money for a vacation. Shop now, Pay Later. Fibe helps with any untoward expenses.

Salary loans benefit both the employee and the employer and it prevents employees from going into any cash crunches from their early days of employment. Salary advance applications are making the process more seamless and hassle-free with their instant approval and quick cash transfer. It is better to choose a loan according to your needs instead of always choosing a salary advance over personal loan.

With the rise in NPAs lately, banks are likely to tighten their purses. In times like these, credit-based applications and solutions like Fibe are bridging the gap and serving a large need. Personal Loan Apps like Fibe are making the process seamless and hassle-free with their instant approval and quick cash transfer.

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