Payday Loans Versus Cash Advance Apps: Which Is The Better Option?

November 3, 2022

You may find yourself short of cash at some point in your life. It might be due to a delayed payment from your clients or an emergency that occurs when you have very little remaining in your bank account. Either way, you’ll still need some financial help to deal with your problem, and that’s where loan providers come into play.

There are many options when it comes to emergency loans, and among the most popular ones are payday loans and cash advance apps. With these financial facilities, you can obtain money quickly—usually within minutes or a few hours. The drawback, however, is that the amount of money you can get here is quite small and may have high interest rates.

Still, it’s a great deal, given the fact that most, if not all, of these personal loans are borrowed against your next paycheck. Payday loans, for instance, only require your banking history and proof of employment. Your credit score may come into the equation once in a while, but only for the purpose of calculating your limits. Wondering how to go about the application process of a payday loan? Browse around here.

Payday loans and cash advance apps have a lot in common, but which one of the two is ideal for you? This article provides a detailed comparison of the two. But first, you should understand what exactly these are.

What is a payday loan?

As the name suggests, this is a type of short-term loan that’s usually due on your next paycheck. This type of unsecured personal loan can be accessed online or through a storefront payday lender. The total amount borrowed plus interest is repaid in one installment upon the borrower’s payday—typically within the next two to four weeks.

What is a cash advance app?

Cash advance apps are a relatively new set of quick personal loans alternatives. This new financial facility allows you to borrow money against the wages you’ve already made or the expected total future earnings. They work pretty much the same as payday loans but are often associated with lower costs compared to traditional payday options.

Payday loans versus cash advance apps

To help you decide which of these two is a better fit for you, consider the following points for comparison.

  • Do you need to provide collateral?

Both payday loans and cash advance apps don’t require you to provide collateral in the form of assets. As such, they’re among the most common unsecured types of personal loans, although that can be debated. The fact that one must provide proof of employment before they can be approved for a loan means your paycheck is technically used as collateral.

  • How much can you borrow?

Payday lending is highly regulated to protect you from borrowing more than you can afford to repay on your next payday. The same goes for cash advance apps, although these regulations may vary with your location. That said, how much can you get from either option?

With cash advance apps, the limits are highly dependent on the app you’re using. Some have maximum limits as low as CAD$100, while others may lend you up to CAD$1,500. Remember, these amounts are calculated per pay period. So, if you delay your repayments, your limits may reduce significantly.

Another factor that could influence your loan limit is your financial situation. Most cash advance apps update this information regularly so that you can make an informed decision the next time you want to borrow.

Payday loans, on the other hand, allow an individual to borrow a maximum of CAD$1,500. This limit applies across the board, and all lenders are required to adhere to this regulation. The amount you can access per pay period, however, will depend on your monthly income. Most lenders give out up to 50% of the borrower’s earnings, while others use the 30% rule. So, generally, if your salary is CAD$1000, you can advance between CAD$300 and CAD$500, depending on the lender.

  • How are interest rates charged?

One of the main factors that differentiate a payday loan from a cash advance app is the cost. Payday lenders charge anywhere between CAD$15 and CAD$30 per CAD$100. In some territories, however, the lenders are allowed to charge up to CAD$60 per CAD$100, which can be very expensive, especially for a low-income earner. Therefore, it’s important to check the interest rates before committing yourself to any loan deal.

Cash advance apps use a different technique. Most of them charge a monthly fee of up to CAD$10. There are those that charge you in the form of “tips,” while others require both a monthly fee and a tip. So, be sure to check the app’s repayment policies before taking a loan.


Quick money-lending facilities have become very popular today. Inasmuch as they all claim to meet your needs as a customer, it’s always important to do your due diligence before borrowing. Hopefully, the discussions in the article will help you distinguish between payday loans and cash advance apps. Of course, the two share a lot of similarities, but understanding their differences is very crucial. Be careful though when applying for any of these loans, so as to avoid going broke immediately after your payday. After all, your ability to repay the loan while meeting other obligations is generally not considered by the lender.

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