When a financial emergency hits — medical bills, urgent home repairs, or sudden travel — the first question is: Where do I get quick cash from?
Two common options are:
🔹 Personal Loan
🔹 Salary Advance
But which one is smarter? Let’s break it down.
What is a Personal Loan?
A personal loan is an unsecured loan from a bank or NBFC that you repay in EMIs over a fixed tenure (1–5 years). It’s approved based on your credit score, income, and repayment ability.
Key Features:
Loan amount: ₹50,000 to ₹40 lakhs
Tenure: 1 to 5 years
Interest rate: 10% – 24% p.a.
Requires credit check
Can be used for any purpose
What is a Salary Advance?
A salary advance is a small, short-term loan given by your employer or via a fintech platform against your upcoming salary.
Key Features:
Loan amount: Usually up to 50% of your monthly salary
Tenure: Repaid by next payday or within 2–3 months
Interest/fee: Flat processing fee or 1.5–3% interest
Quick disbursal, often no credit check
Employer consent may be needed
Personal Loan vs Salary Advance: A Side-by-Side Comparison
| Feature | Personal Loan | Salary Advance |
|---|---|---|
| Loan Amount | High (₹50K–₹40L) | Low (up to 1 month salary) |
| Interest Rate | 10%–24% p.a. | Flat fee or 1–3% |
| Tenure | 1–5 years | 1–3 months |
| Credit Score Needed | Yes | Often No |
| Disbursal Time | 1–3 days | Within hours or 1 day |
| Repayment Flexibility | High | Limited |
| Best For | Big emergencies | End-of-month cash crunch |
Which One Is Smarter in a Financial Crisis?
Choose a Personal Loan if:
You need a large sum of money
You want longer repayment flexibility
You have a good credit score
Choose a Salary Advance if:
You need small, fast cash to cover a few days
You’re confident of repaying in the next salary cycle
Your employer or platform offers it with minimal hassle
⚠️ Watch Out For:
Repeated use of salary advances can create a debt cycle
Personal loans come with prepayment charges or penalties
Always read the fine print — especially fees and interest structures
❓FAQs
1. Which is cheaper: a personal loan or salary advance?
For short-term needs, a salary advance is cheaper. For long-term needs, personal loans may offer better structured EMIs.
2. Can I take both together?
Technically yes, but it’s not advisable unless you can manage repayment on both fronts.
3. Will salary advances affect my credit score?
Typically no, unless it’s from a fintech lender that reports defaults. Personal loans, however, directly impact your credit score.
4. Is salary advance taxable?
No, if it’s adjusted against salary. But if structured as a loan with interest, tax implications may apply.
5. How fast can I get money?
Salary advance = same-day disbursal in many cases.
Personal loan = usually 1–3 days after verification.
Published on : 6th August
Published by : SMITA
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