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

Published on: 27 March 2019

Modified on: 12 April 2023

Table of contents:

• What is a salary advance?
• What is a personal loan?
• Difference between a salary advance and a personal loan
• How to choose between a salary advance or a personal loan?
• FAQs

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. Almost 80% of the employees exhaust their monthly earnings before the next pay cheque, says EY-Refyne survey. 

Naturally, situations only worsen in case of an emergency. Thankfully, there are credit facilities that can help in such situations. A salary advance, for instance, or a personal loan are some of the commonly preferred options and for 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. 

What is a Salary Advance?

A salary advance is a short-term credit facility you can avail of to address cash shortages before you get your next salary payment. Some organisations allow you to get these funds and deduct the amount from your future salaries. 

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

What is a Personal Loan?

A personal loan is more of a traditional 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 ₹35 lakhs, depending on your eligibility and the lender’s terms. 

Here, lenders offer tenures of up to 60 months, and you must make monthly payments. The credit score requirements for a personal loan are stringent, and it is easier to get a salary advance loan. Most lenders have a credit score criterion where you need to have a score above 700 or 750 in some cases. 

Difference between a salary advance and a personal loan

Given below is a tabular overview of a salary advance vs a personal loan:

Salary advance or personal loan – How to choose 

To know how to choose between the two, simply comparing a salary advance vs a personal loan isn’t enough. You need to consider your personal requirements and decide accordingly. 

Here are a few pertinent questions to ask when deciding whether a salary advance or a personal loan is the right choice.

1. How long can you wait?

With the right lender, you can get instant cash with a personal loan, whereas a salary advance can take a couple of days. 

2. What is the loan amount you need?

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

3. What is the preferred repayment route?

A salary advance deducts the outstanding amount from your future salaries. If you opt for a salary advance loan or a personal loan, you can opt to repay in instalments over a short-term tenure. Apart from the above, factor in the total cost of borrowing while deciding whether to avail of a salary advance or a personal loan. You can easily understand your borrowing costs and avail of an Instant Loan on the Fibe App or website.

FAQs about Salary Advance or a Personal Loan

When do you choose a salary advance rather than a personal loan?

A personal loan helps you tackle financial emergencies as well as planned expenses whereas a Salary Advance helps you to manage your short-term requirements when there is a cash crunch. You can avail of this facility easily if your organisation is providing it. You can get up to ₹5 lacs of loan even if you are new to credit at an interest rate of 0.5% with Fibe.

Is salary advance a loan?

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. But you can avail of this facility only if your organisation is providing it.

What things do you need to know before applying for a Personal Loan?

Here are a few things you need to know before availing of personal loans:

• Have a proper comparison of market interest rates
• Estimate and ensure timely repayment of EMIs
• Requires you to meet specific eligibility criteria
• Examine your credit needs to avail the correct amount

How do I apply for an advance salary loan?

To apply for an advance salary loan, you can avail of this facility easily if your organisation is providing it. Get up to ₹5 lacs of loan by completing the application process with minimal documentation even if you are new to credit at an interest rate of 0.5% with Fibe.

What is the maximum amount that can be borrowed with a salary loan?

The maximum amount you can borrow depends on your monthly income and the lender’s loan limit. With Fibe, you can avail of up to ₹5 lacs.

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, repayment tenure is flexible starting from 3 months and goes up to 2 years.

What is the best reason for advance salary?

There could be multiple reasons for opting 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.

Is advance salary taxable?

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