Ever found yourself short on funds and not sure what to do? Maybe an emergency came up, or you’re finally ready to buy a car, fix up your house, or even start a small business.
In times like these, borrowing money from the bank can be a real lifesaver. You’re probably looking around for personal loans or car loans, or maybe considering a credit card cash advance.
At first glance, these options might seem pretty similar, but they’re actually very different in how they work, how much they cost, and how fast you can get the money. Let’s talk about the most important differences between them so you can choose the one that fits your needs best:
1. The Amount You Can Borrow
One of the biggest differences is the amount of money you can get. A cash advance will allow you to take money out using a credit card like the Landers Cashback Everywhere Credit Card by Maya. It’s fast and simple, but there’s a limit. Most banks will only let you take out around 30% to 50% of your credit limit. That means that if your card has a credit limit of PHP 100,000, you might only be able to get PHP 30,000 to PHP 50,000 in cash.
Loans, on the other hand, may give you access to more money. Banks will look at your income and other factors to decide how much you can borrow. A personal loan, for example, can range from PHP 20,000 to several million pesos. This makes a loan a better choice for big goals or major expenses.
2. Your Purpose for Borrowing
People usually take a cash advance when they’re dealing with an emergency. It could be a medical bill, a car repair, or something unexpected that needs money right away. Since a cash advance is easy to access and doesn’t require a lot of steps, it’s helpful when you’re in a rush.
Loans, however, are mostly used for planned expenses. Many people get a loan to pay for education, home improvements, or to start a business. Some loans are even designed for specific goals, like buying a car or a house.
3. How You Pay It Back
A cash advance adds to your existing credit card balance. That gives you some flexibility because you can pay it back when you can. But the longer it takes you to repay the advance, the more interest you’ll end up paying.
Meanwhile, loans work differently. The bank gives you a fixed schedule for making payments. Usually, this means paying a set amount every month until the loan is fully paid. This makes a loan easier to budget.
4. Interest Rates and Fees
Cash advances are known for charging higher interest, often between 2.5% and 3.5% per month. In most cases, interest begins the moment you withdraw the money—there’s no grace period like you might get with regular credit card purchases. On top of that, many banks charge a fee for the transaction, which is often 5% of the amount you withdraw.
On the other hand, loans usually come with lower interest rates. A personal loan, for example, often has a monthly interest rate of about 1% to 2%. The total cost can still be high depending on the loan term, but it’s generally cheaper than a cash advance.
5. What You Might Risk
Cash advances are unsecured. That means you don’t have to offer anything you own as a guarantee. You’re simply borrowing against your existing credit limit, and the bank trusts you’ll pay it back.
On the flip side, loans can be secured or unsecured. A secured loan means you’ll have to offer something valuable, like your car or property, as collateral. If you skip your monthly payments or can’t pay the full amount, the bank can take that item to cover your debt. An unsecured loan, meanwhile, doesn’t need collateral, but the bank will check your finances closely before approving your application.
6. How You Can Use the Money
When you take a cash advance, the money is yours to use however you want. You don’t need to explain what it’s for, and there are no restrictions. You can use it for bills, emergencies, family expenses, or anything else.
Meanwhile, some loans come with rules about how the money is used. A home loan, for example, has to be used for buying or improving a house. A business loan must go toward business-related costs. Certain banks may even ask for proof or receipts as you pay back your loan.
7. How Fast You Can Get the Money
Cash advances are fast. If you have a credit card with an available limit, you can take out cash from an ATM anywhere in the world or request it online. There’s no paperwork, and you can have the money in minutes.
Loans, meanwhile, take more time. You’ll usually need to fill out a form and submit documents like a valid ID, proof of income, and employment records. Approval might take a few days or even a couple of weeks, depending on the bank and the loan amount. But if you’re not in a rush and would rather pay less interest, a loan could be worth the wait.
Which One Should You Choose?
Both options have their pros and cons, and the right choice depends on your situation. A credit card cash advance is fast, flexible, and doesn’t need paperwork. That means it’s great for emergencies or short-term needs, even though it may come with higher costs. On the other hand, a loan usually takes more effort to apply for, but it offers you larger amounts, lower interest, and a clear payment plan. That makes it a good fit for big plans or long-term goals.
Before making a decision, think about how much you need, how fast you need it, and how soon you can pay it back. Taking the time to understand these differences will help you borrow smarter—and stay in control of your money.