It is the 20th of the month and you need urgent cash to meet an emergency. Your payday is 10 days away. You have a choice to swipe your plastic or look at an advance against your salary or go for a personal loan. Which is the best option and how do they stack up against each other? Let us compare the salary advance loan with the personal loan to figure out which is better.
What is a salary advance loan?
A salary advance loan is quite similar to a personal loan. It is an unsecured loan that is pegged against your salary. You can get a loan up to 2.5 times your net salary and you can repay it in fixed EMIs over a short tenure of 3-12 months.
If you are an Indian resident or citizen over the age of 21 years and earning a net monthly salary of over Rs 40,000, you are eligible to apply for a salary advance loan. At LoanTap you can get a salary advance loan of Rs 25000-Rs 1,00,000 depending on your salary and your credit score.
The processing is quite simple. After you fill in the online application and upload the basic documents, your application is evaluated by the team. You can complete the KYC process online in just 2 minutes. Once the loan is approved, the amount is credited to the mandated account. The entire process takes 24-36 hours.
The interest on the advance salary loan is 2.5% per month. It needs to be paid in fixed EMIs over the loan tenure. You can prepay the loan after 6 months without any prepayment penalty.
Salary Advance loans have a processing fee of Rs 2500 plus GST for ticket sizes up to Rs 50,000 and Rs 5000 plus GST for loans between Rs 50,000 and Rs 1,00,000. A salary advance loan is quite convenient in times of emergency when you need a small amount to tide over the crisis.
What is a personal loan?
A personal loan is an unsecured loan that can be taken to meet any short term financial need. The Personal loan eligibility criteria are quite simple. If you are an Indian citizen or resident over the age of 21 years and earning a net monthly income of over Rs 30,000, you are eligible to apply for personal loan. At LoanTap you can get personal loans from Rs 50,000 – Rs 10,00,000 for tenures ranging from 6 months to 3 years. Interest rates start from 18%p.a. There are flexible repayment options available to choose from. You can prepay the loan after 6 months without any prepayment penalty. The processing fee for a personal loan is around 2.36 % inclusive of GST.
All you need to do is to fill an online application and upload the following documents –
- PAN Card
- Aadhaar Card
- Salary Slips for the last 3 months
- Bank Statement of salary account for the last 6 months
The LoanTap team evaluates your application and if your credit score and documents are in order, the loan is approved and disbursed within 24-36 hours.
How is a personal loan better?
A personal loan is more versatile than a salary advance loan on many counts. Let us examine the benefits in detail.
Flexible loan amount – Salary advance loans are limited to Rs 1,00,000 while a personal loan may go up to Rs 10,00,000. So salary advances can be used for meeting short term cash requirements only.
Flexible loan tenure – The tenure of a salary advance loan is from 3 months to 12 months only while a personal loan can be taken for 6 months to 5 years. The terms and conditions of a salary advance loan are more rigid compared to a personal loan.
Better rates of interest – A salary advance loan charges 2.5 % per month which makes it 30% annually. It is as high as a credit card. Personal loans come at much cheaper rates. At LoanTap, Personal loan interest rates start from 18% per annum.
Lower processing fees – LoanTap charges a processing fee of 2.36% including GST on personal loans while the processing fees for salary advance loans are higher at Rs 2500+GST (Loans up to Rs 50,000) and Rs 5000 +GST (Loans between Rs 50,000- Rs 1,00,000). This adds to the cost of the salary advance loan making it more expensive compared to a personal loan.
More versatile – Personal loans can be used for a variety of purposes whereas salary advance loans have limited use since the amount is low. It makes sense to opt for a personal loan instead of a salary advance loan if you take all costs into consideration.
Better EMI planning – With a personal loan, you can plan your EMI better by adjusting your loan tenure. You can use the personal loan EMI calculator to work out the optimum EMI that fits your budget and select your tenure accordingly. Since the salary advance loan comes for a very short tenure, there is not much flexibility available.
Impact on credit score – Taking a personal loan and paying it on time helps to boost your credit score. On the other hand, timely repayment of a salary advance loan does not have much impact on your credit score.
In conclusion, we can safely say that a personal loan is more universal in appeal, especially if you need a higher amount for a longer tenure. While the absence of paperwork and quick disbursal remain the same in both cases, the higher processing fees and interest rates tilt the scales in favour of a personal loan.
LoanTap offers tailored personal loans to meet every situation. You can visit the LoanTap website for more information and we will gladly assist you.
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