Knowing the Difference Between Long Term Loans and Short Term Cash Advances

From their name alone, short term cash advances and long term loans are immediately recognizable as being different—even opposite, to an extent. There are a great many differences between the two, and it’s important to understand those differences, if you’re looking at either.

Long term loans are typically used to start a business, buy a home, buy a car, and other big purchases and major expenses. These loans come from a bank usually, and are secured. When a loan is secured, we mean that you have put up collateral to insure that you will be responsible for and pay back the loan. So, in essence, you have to have the money before you can get the money. People take out loans as an investment. These long term loans are for something they’re sure is going to be worth it in the long run. Long term loans are for thousands and thousands of dollars, even more. There is a lengthy application process, often drawing out over weeks and sometimes months to be approved for a long term loan. The general rule of thumb is: the bigger the loan, the longer the wait. Every aspect of your credit history is poured over and looked into. Failure to pay bills on time, defaulting on previous loans, or simply not making enough money can all seriously hamper your ability to get a long term loan. Even the company you keep as in your business associates and family members can impact your ability to get a long term loan. These loans have set interest rates, and are often renegotiated through the years it takes to pay them back. You often can’t extend a long term loan, although if you’ve done well with your payment history, you can take out a new loan once the first is paid off or even before that.

With a short term cash advance, most of the rules associated with a long term loan go out the window. There is no in-depth credit check. As a matter of fact, short term cash advances were designed with those who suffer poor credit history in mind. The maximum amount for a cash advance is usually between $1000 and $1500 from most companies, whereas a long term loan won’t even be given out for such a small expense. The cash advance is due usually within one or two weeks—whenever your next payday is. The only collateral required is a paper or electronic check from your bank account for the amount of the cash advance plus any fees. The amount a cash advance company will loan you is based mostly on your recent earnings and on your history with that company in particular. The short term cash advance is made to help people out of a difficult situation whereas the long term loan is designed to help people make a good situation better.