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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 75% 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. A salary advance, for instance, or a personal loan are some of the commonly preferred options and for a good reason.
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.
A salary advance is a short-term credit 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. Such a loan is also referred to as a personal loan on salary eligibility or a personal loan on salary basis. Other terms by which you can refer to this type of credit is payday loan or cash advance loan. A key feature of this credit facility is that it is offered only to salaried individuals.
A personal loan is a popular credit facility offered by most financial institutions. Personal loans are available to both salaried and self-employed individuals. The maximum loan amount you can avail can go up to ₹50 lacs, depending on your eligibility and the lender’s terms.
Here, lenders offer tenures of up to 60 months, and you must make monthly payments in the form of EMIs to repay the amount along with the interest. The credit score requirements for a personal loan can be stringent based on the lender. Most lenders have a credit score criterion where you need to have a score above 700 or 750. Thus, it may be easier to get a salary advance loan.
Given below is a tabular overview of a salary advance vs a 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
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 the right choice.
With the right lender, you can get instant cash with a personal loan, whereas a salary advance can take a couple of days to process.
Salary advances primarily depend on your salary, whereas a personal loan will usually offer a larger quantum of funding.
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. You can easily understand your borrowing costs and avail of an Instant Loan on the Fibe App or website.
A personal loan on salary basis helps you tackle financial emergencies as well as planned expenses, whereas a salary advance helps you manage short-term requirements when there is a cash crunch. You can avail of a salary advance easily if your organisation is providing it. If not, you can get up to ₹5 lacs as a personal loan even if you are new to credit on Fibe.
Yes, a salary advance from Fibe is an instant loan you can rely on when you need funds. You can get a salary advance of up to ₹5 lacs, which is transferred directly to your bank account within minutes. You only pay interest on the amount you use, and there are no prepayment charges to worry about. However, you can avail of this facility only if your organisation is providing it.
Here are a few things you need to know before you apply for a personal loan on salary eligibility:
To apply for an advance salary loan, first make sure that your organisation or employer provides it. Then you can apply online following the process set by the organisation or on the Fibe website or app.
The maximum amount you can borrow depends on your monthly income and the lender’s loan limit. With Fibe, you can avail an amount of up to ₹5 lacs.
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 2 years.
There could be multiple reasons to opt for an advance salary, such as unforeseen expenses or medical emergencies. If you need funds for a short period and instantly, getting an advance salary can be ideal.
Yes, your advance salary loan is taxable for the year in which you avail of the credit facility.