[ad_1]
Dubai: It is generally recommended that you save 20% of your monthly income for emergencies. But what if the money you’re saving isn’t enough for your immediate needs? So, will you fill this urgent need with an instant personal loan, using a credit card, or borrowing money from a friend?
“Most lenders offer instant personal loans for at least 12 months. However, getting instant personal loans without high interest rates in the early stages of your career can be difficult,” says Dubai-based wealth advisor Mohamed Shah.
Most lenders offer instant personal loans for at least 12 months.But getting an instant personal loan without high interest rates early in your career can be difficult
– Muhammad Shane
“This is a very long time when the concept of salary advances is gaining in popularity. Also, salary advance apps remove the cumbersome and lengthy paperwork that accompanies bank approved loans.”
Although, we now have an easier option which is a payroll advance loan, but when should you choose a payroll advance loan and when is it best to choose a personal loan? Let’s find out. But first, let’s understand what it does.
What is a Payroll Advance Loan? How does it work in UAE?
“While the terms vary from bank to bank in the UAE, in some cases you can use this facility for up to 90% of your salary,” says Andrea Barber, a financial planner in Abu Dhabi. “However, in almost all cases, your minimum wage should be Dh5,000.”
“Bank customers can apply for this facility on a monthly basis, but not more than twelve times in a year. Also, the prepaid salary option used should be fully repaid by the end of each month. A fee is charged, with a minimum fee of Dh300. However, this is not the same as the UAE’s Every bank is different.”
Image credit: Shutterstock
How is an instant personal loan different from a salary advance?
A payroll advance loan is a short-term loan offered to salaried professionals. It can be used for any purpose such as medical bills, huge expenses or any other emergency.
A personal loan is an amount borrowed for long-term financial needs—a debt that needs to be repaid over time. Loans are available for a variety of needs – for investments such as cars, houses, and even education expenses. On the other hand, immediate salary advances are used to meet short-term financial needs.
This amount, when received from your company, is deducted from salary by the employer. However, when a bank offers a salary advance loan, it caps or limits repayments to one year.
“In order to approve an instant personal loan, the bank looks into your credit score and financial situation. Even then, the interest rate may not be ideal,” adds Shaan.
“However, the interest on a salary loan is low. It’s also great for cash-strapped individuals who want a quick loan to fund sudden expenses until their salary is credited.”
In order to approve an instant personal loan, the bank looks into your credit score and financial situation.Even so, interest rates may not be favorable
– Muhammad Shane
Besides a payroll advance loan, what other options do I have?
Whether or not a salary advance is a good option, it’s not your only option. You can also obtain funds in other ways to cover unforeseen expenses.
However, before choosing any of the options below, it is important that you have a plan in place to pay off this debt as quickly as possible due to the associated interest costs. Some other alternatives include:
• personal loan
A personal loan is a loan with a predetermined repayment date provided by a bank or other lender. The great thing about a personal loan is the term. You’ll get longer periods of time to pay back the money you borrowed, even years.
Interest rates on personal loans also tend to be lower than on credit cards. However, obtaining a personal loan usually has strict credit requirements. They are also not suitable for small loan requirements, as many lenders require you to borrow at least a few thousand dirhams.
• credit card
Your credit card can be a surprising option for paying for sudden expenses. The benefits of a credit card come down to whether you can use it wisely. For example, you have balance available to cover unexpected expenses.
You’ll also be paid next week, but your credit card won’t be due until two weeks later. That means you have time to pay your fees, pay off your balance at your next paycheck, and still avoid high interest charges on your credit card.
Illustrative image.
Image credit: Shutterstock
What risks do you need to know before getting a salary advance?
However, paying salaries in advance is not always the most efficient way to get money quickly. Borrowing money from your future salary has some disadvantages.
“Most salary advances are paid back on your next payday. If you’re struggling to make ends meet, dropping your next paycheck now to get cash may not be an ideal solution,” warns Barber.
Another major risk with salary advances is that if you take out short-term loans, you could end up in a cycle of debt.
“A salary advance loan is still a form of credit. So if you find that one advance doesn’t cover all your financial needs, you have to take out another advance. This leads to a reliance on credit to make ends meet and makes you into ongoing debt,” Shaan explained.
How do you choose a payroll advance facility?
If you decide to go ahead and choose a salary advance, salaried employees can use the salary advance in any of the following ways:
• Log into your online banking and submit your salary application in advance
• Use of dedicated banking terminals
• By sending SMS from registered mobile number
• Apply via ATM
• Go to your bank branch and submit your payroll application in advance
What else should I pay attention to when paying salary in advance?
“Think about your existing repayment history with the bank, why you’re asking for an advance and how you want to repay the loan in the future,” Barber added.
“If you’re unsure about any of these factors, investigate the alternatives above to get the funds you need. If you’ve considered the situation and are still convinced you need a salary advance, you can proceed.”
So before you start applying for a salary advance, think through your financial situation, reiterates the financial planner.
“Payroll advance loans can be an alternative to credit cards when you need cash urgently,” adds Shaan. “Before asking for an advance, you need to understand the borrowing requirements, repayment terms, and any potential fees.
“This will help you determine if a payroll advance loan is right for your financial situation. However, remember that it doesn’t matter how big your paycheck is.”
Image credit: Shutterstock
Conclusion: Are Salary Advances Better Than Instant Personal Loans?
Compared with personal loans, the procedures for salary loans have always been more convenient, and the amount and interest rate are also more flexible than loans.
“Your payroll advance loan will typically be deducted from your future paychecks, making repayment easier,” says Barber. “You don’t need to save money separately to repay the advance.”
“Getting approved for a loan at a bank can take weeks to months and can be a tedious task with a lot of paperwork. Loans require more paperwork and can be time consuming.”
Also, banks may take 7-15 business days to approve personal loans and transfer funds. “However, since the entire process is handled online, salary advances don’t require much time or paperwork,” Shaan added.
“Salary loans are also a faster option because it doesn’t involve any middlemen. There are many banking apps today that can help you get a salary loan.”
If your ability to take on more debt remains unaffected, the latter is an advantage over the former when it comes to personal loans versus salary advances.
[ad_2]
Source link