When your monthly expenses surpass your salary, you have to dip into your on savings to meet your needs. Sometimes, with expensive purchases, this may not be an option. Thus, you might consider taking a salary advance loan or a personal loan. Both options seem to achieve the same goal, so why choose one over the other?
While the two appear similar on the surface, both being loan products, they work quite differently. Clearly, personal finance proves to be a better option for most individuals, as opposed to a salary advance loan. Let’s see why.
The Disadvantages of a Salary Advance Loan
For salaried professionals looking to fulfill short-term financial requirements, a salary advance loan is an enticing option. It is a quick fix for your monetary troubles – disbursed within a few hours, requires no paperwork hassle, and no collateral is demanded. But as the saying goes, ‘if it sounds too good to be true, it probably isn’t.’
Here is the catch – the interest rates on salary advance loans are skyrocketing. They are one of the highest as compared to any other loan category in India. In simpler terms, your EMI will be outrageously higher than you expect.
The high EMI going out of your account can toss your monthly budget out of balance, resulting in a debt trap.
Additional Read: Why There Is a High Growth of Personal Loans in the Indian Market?
Personal Loan vs Salary Advance Loan
Here is a quick comparison of the two-
- Availability: Almost all lenders in India offer personal finance which you can apply for online. Only a few lenders provide a salary advance loan.
- Accessibility: Only salaried professionals can access a salary advance loan, whereas both salaried and self-employed people can take a loan for personal use.
- Purpose: Salary advance loans are short-term fixes that can be taken, used, and repaid in a few months. They aren’t suitable for the long term.
- Rate of Interest: Here, personal finance has a clear advantage over salary advance loans. Personal loan interest rates are more competitive, which means you pay lower EMIs.
Why Choose Personal Loans?
Apart from their many advantages, personal loans are also easier to repay. A salary advance loan is a short-term solution, and the tenure cannot exceed more than a 12-15 months. Personal finance products, on the other hand, have a longer tenure as compared to salary advance loans, which means you enjoy greater flexibility in terms of EMI and repayment.
When planning to take a loan, set realistic goals for repayment over the loan tenure. With a flexible tenure and affordable rates of interest, a well-planned loan for personal use can help you meet a variety of goals.
Additional Read: EPF Advance v/s Short-Term Personal Loan
Before applying, use Tata Capital’s personal loan EMI calculator to understand your monthly payments. Choose Tata Capital for multi-purpose loans that you can use for a multitude of personal uses. We ask for no collateral, and extend flexible repayment terms to our customers. Contact us today to know more.