Many or all companies we feature compensate us. Compensation and editorial research influence how products appear on a page. Personal Loans Personal Loan vs. Cash Advance: Choice Depends on Loan Amount and Speed of Funds Updated Dec 02, 2024 4-min read Expert Approved Expert Approved This article has been reviewed by a Certified Financial Planner™ for accuracy. Written by Andy Rowe Written by Andy Rowe Expertise: Personal Loans, Credit Cards, Real Estate, Financial Technology Learn more about Andy Rowe Reviewed by Eric Kirste, CFP® Reviewed by Eric Kirste, CFP® Expertise: Debt management, tax planning, college planning, retirement planning, insurance planning, estate planning, investment planning, budgeting, comprehensive financial planning Eric Kirste CFP®, CIMA®, AIF®, is a founding principal wealth manager for Savvy Wealth. Eric brings 22 years of wealth management experience working with clients, families, and their businesses, and serving in different leadership capacities. Learn more about Eric Kirste, CFP® Choosing between a personal loan and a cash advance depends on your financial situation and needs. Personal loans are better for larger expenses like home improvements or debt consolidation. They offer higher limits and longer repayment terms but require a credit check. Cash advances are ideal for emergencies or bridging a short-term gap. They offer smaller amounts and quicker access but higher fees. Knowing when each option works best can help you avoid unnecessary costs and stress. Read on to explore their differences and determine the right choice for you. Table of Contents Skip to Section Personal loan vs. cash advanceShould I use a cash advance or a personal loan? Personal loan vs. cash advance A personal loan is an installment loan offered by a bank, credit union, or online lender. You receive a lump sum upfront, which you repay in fixed monthly payments over time. The loan includes interest and can be used for anything, such as home improvements, debt consolidation, or an emergency. A cash advance is a short-term loan designed to cover an immediate expense until your next paycheck. Loan sizes vary, but you can expect them to be less than what you would receive from a personal loan. Repayments are automatically deducted from your bank account and include a service fee. Most cash advances don’t require a credit check, making them more accessible to borrowers with little to no credit history. Key differences Both options give you access to cash, but key differences exist in the terms of the loans, eligibility requirements, and costs. A personal loan is better suited for larger sums from $500 to $100,000. The extended repayment period and fixed rates make it easier to plan around, but it requires a credit check, which impacts your credit score. A cash advance doesn’t require a credit check for approval but does require proof of income. Advance amounts range from $50 to $500 and are expected to be repaid in a short period of time. A cash advance doesn’t typically come with interest, but you should be wary of monthly service fees. The table highlights the main features and key differences between personal loans and cash advances. FeaturesPersonal loanCash advanceInterest ratesFixed rates vary according to credit scoreNo interestLoan amounts$500 – $100,000$50 – $500Repayment terms12 – 84 months 30 days or lessCredit impactRequires a credit checkNo credit check EligibilityGood credit and proof of incomeProof of income and a checking accountFeesOrigination feesMonthly service fees Should I use a cash advance or a personal loan? Should I use a cash advance or a personal loan? The answer depends on the purpose of the loan. Here are some common situations people are faced with that might help you decide which you’re better suited for: If you need to…Consider Consolidate multiple loans and debtPersonal loanMake a major purchase or home improvementPersonal loanBuild or improve your credit scorePersonal loan Pay for an emergency expense Cash advance Bridge gaps between paychecks Cash advance Handle budget gaps Cash advance Debt consolidation Are you managing multiple high-interest loans? A personal loan is the best way to consolidate your loan repayments and lower your interest rates. Debt consolidation streamlines your payments and reduces your overall interest costs. Major purchases Are you planning on a major purchase, like a home appliance or a home renovation? Personal loans have flexible terms and offer larger loan amounts to expense your costs over a longer period of time. In other words, renovate the kitchen without putting a strain on your next paycheck. Build credit Are you trying to improve your credit score? A personal loan is a good way to build up your credit history and improve your current credit score. Consistent monthly payments have a positive impact on your credit score if you keep your balance low and meet the due dates. Emergency expenses Are you facing unexpected medical bills or an emergency car repair? A cash advance is a quick way to gain an advantage. Many cash advance providers offer same-day funding, so you can pay for an urgent expense without a long application process. Short-term expenses Do you need to cover an overdraft fee? A cash advance is ideal for bridging the gap between paychecks. You get quick access to small amounts of cash without any long-term obligations. Budget gaps Are you short on day-to-day expenses? A cash advance is a low-cost solution to minor budget gaps. It allows you to avoid high overdraft fees and late payment penalties on everyday expenses. I advise using cash advances as a last resort for a small, immediate need that can be repaid quickly. Personal loans are generally better for larger intermediate and longer-term borrowing needs as they usually have a lower interest rate and more manageable repayment schedule, especially if you have good credit. Eric Kirste, CFP® Read More Best Personal Loans and Best Cash Advance Apps