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Line of Credit vs. Short-term Cash Advance – Which is Right for You?

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Line of Credit vs. Short-term Cash Advance – Which is Right for You?

When personal financial trouble strikes, it often can seem like everything is falling apart at once. Whether your car has broken down, an appliance stopped working and needs replacement, you have unexpected bills or expenses, or just need some emergency money, it always seems to happen at the worst possible time. But don’t despair, there is hope! In fact, there are two common personal lending options that are ideal for people who need to borrow money, line of credit loans and short-term cash advance. Each offers different advantages and disadvantages, and depending on your personal financial situation, one may be more well-suited for your needs than the other.

In this guide, we’ll take a look at both line of credit loans, alongside short-term cash advance loans, sometimes called instant cash loans or payday loans. We’ll explore what each of these are used for, their various lending criteria and how they work, along with the pros and cons of each of these types of personal loans. Then, we’ll try to provide some useful quick-reference comparisons and guidance on which would be best for the different kinds of financial needs and situations. Finally, we’ll dig a bit deeper into the details on cash advance loans and talk about one of Canada’s most trusted online lenders, iCASH – what they offer, how the process works, and how you can have money in your account as quickly as today!

What is a Line of Credit?

personal-line-of-credit

A line of credit is a form of personal loan, which provides the borrower with access to funds up to a certain maximum amount. The borrower does not need to access the entire line of credit, and pays interest based only on the amount actually outstanding. It’s paid back over time, typically a much longer duration than a payday loan. In simple terms, a personal line of credit is similar to a credit card. There’s a borrowing limit, and you don’t need to use it all and reach that limit. You can pay down your outstanding balance all at once or make minimum payments and pay it back over a much longer term, and even borrow money against the funds again, so long as you are below your limit. Unlike credit cards that are primarily used for purchases, the credit line provides cash funding at the base interest rate of the loan.

Personal line of credit can be fairly complex and demanding to apply for, inasmuch as they require good credit score, proof of income, and other documentation requirements. They have a much higher rejection rate than payday loans and may have structured tiers of interest rates based on your credit report. They are similar to other, larger loans in this sense – a mortgage loan, auto loan, and so on. There’s a considerable amount of vetting that needs to take place by the lender before approving the loan, a process that can take some time (several days to weeks in most cases). However, they do provide a flexible solution for those in need of credit and cash, and generally offer a much larger upper limit for borrowing than short-term loans. Like a payday loan, however, they do not typically have collateral requirements.

What is a Short-term Cash Advance?

By contrast, short-term cash loans also known as a payday loan is much more in the mold of what people consider a “traditional” loan. A particular, set amount of funding is requested as part of the loan application. There’s an associated interest rate or fee, and a required loan repayment date (or installment plan, in some cases). You receive the funds as a lump-sum payment, and pay it back, with interest. Payday loans are typically very short-term. The exact period of the loan can vary depending on the borrower needs, along with the chosen repayment plan option.

short-term-cash-advance-loan

Like personal lines of credit, payday loans generally don’t have a collateral requirement. These short-term cash advance loans differ in that they are provided for a set, maximum amount at the time of approval, and then must be repaid as per the repayment plan. They also are typically easier to apply for. Some Canadian lenders also provide what’s known as bad credit loans. Documentation requirements are usually minimal, and only rely on self-reported information about income. As such, these loans tend to max out at a lower maximum limit than a line of credit, and no additional funds are available until the loan is repaid. But the upside is they’re typically available with much less lead time – hours to a day or two, in most cases, rather than days to weeks like a credit line. They usually have a pre-set fee structure or interest rate, that is not dependent on a credit score, and is due at the time the loan is repaid (rather than an ongoing, daily interest rate calculation in the case of lines of credit).

What Can You Use Short-term Cash Advance and Line of Credit Funds For?

There really are no considerable limitations on the use of funds from either payday loans or lines of credit, and borrowers can typically use the funds as they see fit (so long as they are not used for illegal purposes). Lenders don’t restrict your fund usage – it’s not tied to a specific expense or purchase the way an auto loan is, for example. Most people who are applying for a cash advance loan or a personal line of credit need the funds for a specific purpose, such as paying for unexpected emergencies or planned expenses, bills, and so on. They may also be used for cash flow purposes. This is often the case with cash advanced loans, where they are used to help ensure you can pay your bills, keep your family fed, and otherwise be financially solvent until your next payday.

Some of the most common uses for lines of credit and payday loans include:

•	Paying for car repairs
•	Paying for planned or unplanned home repairs, expansions, or renovations
•	Paying for a repair or replacement of an appliance that has broken down
•	Paying for unexpected bills, such as medical, dental, or related expenses
•	Having the flexibility of funds available to pay down higher-interest debt, such as credit cards
•	Making ends meet between pay periods
•	Purchasing furniture or other home items
•	Being able to afford travel and lodging for family emergencies
•	Purchasing school and living supplies for your college-bound child
•	Dealing with disaster clean-up, such as burst pipes, flooding damage, and so on

Really, though, the uses for funds are only limited by your particular financial circumstances and need. They can be put towards the best use you personally have to cover the expenses, purchases, goods, and services you see fit to manage your financial and living situation.

Pros and Cons of Personal Line of Credit

Like any product or service, it can be highly beneficial for the sake of comparing and contrasting a credit line with other loans to look at the pros and cons that they each offer. Specifically, analyzing the benefits and drawbacks of each kind of loan can better help consumers make a decision as to what type of loan product is right for them.

Pros

•	Can obtain larger amounts of funding
•	Longer term to pay back the loan
•	Generally lower rates or fees than a traditional payday loan
•	Additional funds can be obtained by using more of the credit line (up to the limit)

Cons

•	Requires good credit to get approval
•	The best rates may be reserved for those with exceptional credit
•	Documentation, income verification, and so on are required as part of the approval process
•	Approval process can take days to weeks in most cases

Pros and Cons of Short-term Cash Advances

And, just as above, it’s important to look at the pros and cons of short-term cash advance, so that we can make a real apples-to-apples, like-for-like comparison between these type of cash advanced loans and personal line of credit, and help consumers determine the ideal solution to meet their lending needs.

Pros

•	Short term loan with generally fixed interest rates or fees
•	Available without a lot of documentation or proof of financial situation
•	Available even with poor credit
•	Fast and easy approval process – funds available within hours to a day in most cases
•	Many lenders offer flexible repayment terms, including installment plans

Cons

•	Smaller overall loan amounts.
•	Rates can be somewhat higher.
•	Additional funds are not available until the loan is repaid

Side-by-Side Comparison Chart of Personal Lines of Credit Vs. Short-term Cash Advance

Comparison-Chart-of-Personal-Lines-of-Credit-Vs.-Payday-Loans-1

Choosing Which Type of Loan is Right for You

Based on all of the above information, you should be able to decide how you like to borrow money – a personal line of credit or payday loan – is right for your particular, immediate financial needs. If you have bad credit history, a bad credit loan is often your best choice. If you have good credit, you can apply for either type of loan – it really depends on how much money you need and over what term. If you’re looking for a relatively small amount of money, to pay off unexpected bills, cover urgent expenses, and so forth, a cash loan is a great choice. If you need access to a larger amount of funds over a longer period of time, a credit line may be your best option.

Aside from the amount of money you need, and your credit history, the urgency of your need, and the length of time/complexity/documentation of the approval process are also worth considering. Line of credit loans generally take days to weeks in order to gain approval. They may involve visits to a bank or lender branch office, signing lots of forms, providing corroborating documentation, paycheck stubs, and so on. It can be several weeks before you get your funds, if you are approved at all. By contrast, payday loans have relatively few documentation requirements. And with online payday loans those offered by iCASH, you can complete the entire application, approval, signing, and funding process online. What’s more, it often takes only hours to at most a single business day in order to get funded.

For Online Short-term Cash Advance in Canada, Choose iCASH

iCASH is a safe trusted Canadian lender. It’s one of the only online payday lenders that is certified by local provincial governments. This means that customers can rest assured the service is secure and reliable. iCASH also uses state-of-the-art encryption and data controls to ensure customers’ personal and financial information remains secure and protected, out of the hands of hackers or other bad actors on the Internet.

The entire process at iCASH can be completed online – the application, approval decision, signing loan documents, and getting your funds by e-transfer. With electronic transfer funding options, most applicants can have funds in their bank account within as little as 5 minutes following signing and submission of the loan agreement documents. What’s more, with a high-tech automated decision-making software system, the approval process is virtually instantaneous. Applicants only need to provide basic information about themselves and their income, and meet a few basic lending requirements, and in no time can be approved for as much as $1,500 in cash, available the same day.

iCASH also offers flexible repayment options, including a single lump-sum repayment, or installment plans of 2 or 3 repayments. And, unlike some lenders, they don’t charge you extra for choosing a 2 or 3 installment repayment option – the rate you pay is the same! Rates are flat and fixed based on province, on a dollars per $100 borrowed basis, and do not vary based on your credit score or credit rating. There are also no hidden fees or surprises – iCASH believes in being an honest, ethical, and transparent lender. And those are just some of the reasons why iCASH is considered by many to be the absolute best online payday lender in Canada today.

iCASH Lending Requirements

At iCASH, the requirements for obtaining a loan are quite straightforward and simple. Bad credit is not a disqualifier, and your credit score doesn’t determine your interest rate. In fact, anyone can apply for a payday loan with iCASH, provided they meet our minimum eligibility requirements, as follows:
• You must be at least 19 years old.
• You must be a Canadian citizen and live in one of the provinces in which we operate.
• You must have been receiving the same source of income for the past 3 months.
• You must have a net monthly income of at least $800.
• You must have a Canadian bank account which has been open for at least 3 months, with access to online banking services.
• You must have a valid mobile phone number, e-mail address, and home address.
And that’s it. So long as you meet those criteria, you can apply online, quickly and easily, and get funded faster than you could even start an application for a line of credit with most lenders!

For More Information about iCASH

For more information on the lending process at iCASH, such as how it works, and how you can apply for a payday loan right away, check out all of the resources and guides at www.icash.ca. Payday loans are often the best choice for consumers looking for a quick emergency cash loan and offer many advantages over personal lines of credit – particularly for those who need cash right away, have bad credit history, and / or want the convenience of an online application they can complete from the comfort of their home. Credit lines certainly have their place, but for most consumers, a short-term cash advance loan from iCASH might be the best option to get emergency money fast, improve your financial situation, and get on with living and enjoying your life.

Alex Charbonneau

Alex Charbonneau hands-on approach to financial planning, investments, and leadership won him the respect of many. Alex is a trustworthy individual & someone that many in Canada aspire to work with.