Salary advances are a type of short-term loan given to paid employees that can be used for any purpose. Personal loans, on the other hand, are given for a period of one to five years to pay higher costs. A salary advance is perfect for people who are short on funds and need immediate cash to cover unexpected bills before their next paycheck arrives. Personal loan interest rates are often higher than salary advance interest rates.
What is Salary Advance?
Employees are offered short-term loans that are deducted from their future paychecks afterwards. Such advancements are permitted by some businesses. The advance is taken from the net income at the end of the month and in subsequent months. In most cases, salary advances are interest-free. Simply put, an employee’s future salaries are used to fund the advance.
Required Documents to Apply for an Advance Salary Loan
It is easy to obtain an advance salary loan in India with us, because of minimal documentation. Ensure that you are submitting valid and legal documents such as:
- Proof of ID – PAN card/Driving license//Passport/Aadhar card.
- Proof of residence – Passport/Rental agreement/Utility bills like a landline, electricity, or water.
- Proof of income – Submit 3-6 months salary slips along with your bank statements.
- Upload photo – Upload photo with your face visible.
Features and Benefits of Salary Advance Loan
- Minimal Documentation
Submit only a few mandatory documents like residential proof, identity proof, and income proof to get your loan approved.
- No Hidden Charges
We believe in transparency. Hence, no hidden charges are levied on you. For further confirmation, you can check the fine print.
- No Usage, No Interest
Interest is not charged if funds are sitting idle in the account. Interest is only levied when you withdraw money from approved funds, but not on the total amount that is borrowed.
- Flexible repayments
If you are not having money to pay your EMI for a particular month, then you can repay only the minimum amount until you become financially stable. The best part is, you can pay back the borrowed money easily in flexible repayments.
What is a Personal Loan?
A personal loan is an unsecured loan, which means you don’t need to pledge any collateral to receive funds. It helps in fulfilling financial needs like wedding expenses, unforeseen medical bills, funding your dream vacation or renovating your home
Documents Required
- ID Proof
- (Valid Driving License / Valid Passport / Voter’s ID / Aadhar Card / Pan Card)
- Pan Card
- Address Proof
- (Valid Driving License / Valid Passport / Aadhar Card)
- 3 Month Salary Slip
- Passport Photo
- 6 Month Bank Statement
Features of a Personal Loan
- Complete flexibility of end-use – There are no restrictions on how you should spend the loan amount. This in contrast to a home loan or auto loan where the loan amount can only be used to buy a property or a vehicle respectively. A personal loan allows you the freedom to use the money in any way you want.
- Lack of collateral – A personal loan is an ‘unsecured loan’, meaning you are not required to provide any security to the lender in the form of cash, shares or any other assets. This might make it more attractive to some customers who may not be able to raise the cash required as collateral.
Difference between Salary Advances and Personal Loans
Salary advances is paying an employee a portion of his salary in advance. For example – If an employee has a medical emergency and is in need for his salary of February in advance then the employer can pay him a portion of his salary beforehand. The advances are recovered in installments and are usually interest-free.
A loan on the other hand is providing a loan at a concessional interest rate as opposed to market rate of interest. The loan could be of larger amount and could be of various types such as house loans, vehicle loans or education loans. Thus the difference between the concessional rate of interest and market rate can provide a huge relief to employees seeking a 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.
Salary Advance Advantages over a Personal Loan
1. Application is simple and funds are disbursed quickly
The convenience and quickness with which the loan cash can be promptly sent to your bank account is the most significant benefit of a salary advance. The entire procedure is completed online and does not require any documents. Personal loans, on the other hand, necessitate more documentation and take longer. It can take 7-15 days for a bank to authorise a loan and transmit the funds. When money is needed urgently during a financial crisis, a salary advance acts as a cushion.
2. Repayment Options
A salary advance provides you with the ‘extra’ cash you need to get through difficult circumstances. A salary advance also gives you more options than a personal loan. A personal loan’s payback duration can be as long as 5 years; given the uncertainties of life, this long-term financial commitment may not be ideal for some borrowers and can cause future issues. Non-payment can harm your credit score and may result in your loan application being rejected in the future. While personal loan payback schedules are set in stone, you may use our loan calculator to find a suitable repayment plan based on your repayment ability. A salary advance allows you to borrow money and pay it back in installments.
3. Need a decent Credit Score for a Loan
A loan from traditional financial institutions almost certainly requires a credit score and a good one at that. If your credit score is high, the interest on your loan will be low. Most young employees cannot take loans because they have no credit and need to build it. Taking any form of credit helps build your credit score, and hence, taking a salary advance should also boost your credit score.
4. Salary Advance gives you Additional Options
In comparison to a loan, the method for taking salary loans has always been more convenient with its procedures and flexibility with the amount and interest rates. The payback of your salary advance loan is usually withdrawn from your subsequent pay stubs, making it easy. You are not required to set aside money for the return of the advance. A salary advance provides you with the ‘extra’ cash you need to get through difficult circumstances. You may also take out a loan for any amount and pay it back the following month.
5. Rates of Interest
The rate of interest levied on loans depends on a variety of factors – many of which young employees may lack since they’ve just begun their financial journey. This results in high-interest rates or large collateral demands. Salary advances on the other hand, charge lower rates of interest. Additionally, they levy interest only on the money that is drawn and used, as opposed to banks where the interest is levied on the accumulated amount as soon as it is disbursed.
Personal Loan Advantages over a Salary Advance
1. Flexible Loan Amount
Salary advance loans are limited to Rs 1,00,000 while a personal loan may go up to Rs 10,00,000. So salary advances can be used for meeting short term cash requirements only.
2. Better Rates of Interest
A salary advance loan charges 2.5 % per month which makes it 30% annually. It is as high as a credit card. Personal loans come at much cheaper rates. At LoanTap, Personal loan interest rates start from 18% per annum.
3. Lower Processing Fees
Lenders charge a processing fee of 2.36% including GST on personal loans while the processing fees for salary advance loans are higher at Rs 2500+GST (Loans up to Rs 50,000) and Rs 5000 +GST (Loans between Rs 50,000- Rs 1,00,000). This adds to the cost of the salary advance loan making it more expensive compared to a personal loan.
4. More Versatile
Personal loans can be used for a variety of purposes whereas salary advance loans have limited use since the amount is low. It makes sense to opt for a personal loan instead of a salary advance loan if you take all costs into consideration.
5. Better EMI Planning
With a personal loan, you can plan your EMI better by adjusting your loan tenure. You can use the personal loan EMI calculator to work out the optimum EMI that fits your budget and select your tenure accordingly. Since the salary advance loan comes for a very short tenure, there is not much flexibility available.
Where to get both Salary Advance and Personal Loan?
Omozing helps make Smart Money Moves for a Lifetime. They strive to get lowest interest rates and best terms for your Online Applications at www.Omozing.com . We’ve made business lending smarter, faster and easier by transforming the approval process from stumbling blocks to stepping-stones. This enables borrowers to not just get access to capital, but also understand what areas they need to work on in order to enhance their credit profile. Omozing ensures that Borrowers get a secure, safe and reliable application process that be tracked online.
5 Reasons to choose Omozing
1. Loans from INR 10k to INR 10 lakhs
Personal Loan Interest Rates starting from 0.8% p.m, and Loan amount ranging from INR 10,000 to INR 10,00,000. The Minimum and maximum repayment period ranges from 1 month to 48 months. CIBIL 600+ all company categories (including LLP, Self Employed, Proprietorship)
2. Cutomised Tailor Options
- Depending on your demands, we may provide quick financing of varying quantities at affordable interest rates.
- You have the freedom to utilise your loan anyway you want, whether for business or for immediate personal needs.
- Flexible repayment options depending on your specific cash flow and budget, as well as conditions that is beneficial to your position.
3. Lower CIBIL
While most lenders require borrowers to have a CIBIL score of over 750, at Omozing.com provide loans even with 600. Besides the CIBIL score, we also considers your age, employment status, and net monthly income.
4. Ways to apply
You can apply for a personal loan through us by 2 ways:
1. You can download our Mobile Application from Google app store.
2. Apply on portal using out Personal Loan link
5. Prompt Loan Disbursal
An easy online application process facilitates speedy verification and disbursal of loan. Get KYC verified from the comfort of your home and have our loan manager take care of an instant transfer of funds to your account.