Payday Loan vs. Wage Advance

February 1st, 2023

5 min read

There are a lot of options out there in the market If you’re looking for quick cash. But not all are the same, and it can be confusing to know what’s best for you. There are payday loans (or SACC loans), pay on demand and personal loans. It can pay to read the fine print, but it’s not always easy to find! Here we break down everything you need to know about cash advance vs payday loans to help you make the best choice for you.

Here is the Difference Between a PayDay Loan and a Wage Advance

Feature	Wage Advance	Payday Loan (SACC loan)
Definition	A portion of an employee's earned wages paid before the regular payday.	A short-term, high-interest loan typically due on the borrower's next payday.
Max loan size	$2,000	$2,000
Upfront fee	5% flat fee	20% flat fee
Interest	24% p.a.	4% flat fee per month
Late fees and penalties	None	Up to 100% of the loan
Example cost of a $1,000 loan over 1 week	$54.62	$240 (if paid straight away) Up to $1,000 if late.
Repayment Structure	Repaid on the users’ next pay day	Typically monthly repayments
Credit Check	No formal ‘credit check.’ However, they will still run a credit assessment on the users’ bank account to determine if they are able to repay the loan	Run a formal credit check that appears on the credit history.

How Payday Loans Work

Payday loans are called SACC loans (Small Amount Credit Contract Loans). Strict rules limit how much payday loans can charge and how they operate. Unfortunately, the costs of payday loans can be incredibly high. Payday loans typically operate by receiving your application for a loan. You then make repayments according to their repayment schedule. You may be best off seeking an alternative to a payday loan.

How Wage Advance Works

Using a pay-on-demand with Wagetap, you can receive money in your account in a few minutes.

Pay-on-Demand

1st. Choose your amount

If you are short of cash, you can request money based on the credit limit set by the wage advance app in line with your monthly income. In Australia, Wage advance apps include MyPayFast with a $750 credit limit, PressPay with $1,000, and WagePay, MyPayFast, and BeforePay with a $2,000 limit. Once your actual payday arrives, you’ll get the rest of your paycheque without any fees to worry about.

2nd. Get paid instantly

You do not have to wait long once you get approved because wage advance apps usually provide the money right away. As soon as you've hit withdraw, the service app sends the cash directly to your bank account. While there are other fast cash options out there, they don’t get approved as quickly, like a payday loan. Also, these loans often come with high fees, and wage advance apps simply provide you with the money you’ve already earned.

3rd. Repay on your next payday

Wage advance typically is a transparent and fair app with their repayments. You do not have to worry about late or hidden fees. You can cash out today and repay it on your next payday.

How Much Can You Borrow?

Payday loans usually have a maximum limit of $2,000 and wage advance apps vary from one to another. You can always borrow much less than the maximum amount often as low as only $100 if you’re just looking for a small cash advance.

On the other hand, if you’re looking to borrow more than $2,000, it might be best to check out MACC loans (Medium Amount Credit Contract loans) or a personal loan with a payday loan alternative.

What are the Costs?

Wage advance charges differently from payday loans. It can pay to know the difference because the cost of payday loans can really add up quickly. To avoid very high costs from payday loans, you may be better to consider a wage advance.

Payday loans typically charge a 20% establishment fee. This means on a $2,000 loan, you’d be required to pay $400. Payday loans also charge a monthly fee of 4% of the amount borrowed, which is another $80 every month.

Payday lenders also can also charge very hefty default fees. If you don’t make a repayment by the due date, you could be charged up to double the amount you borrowed.

Wage advance is different. You’ll pay a one-off 5% flat fee, which is $25 on a $2,000 loan. Plus, you’ll also pay interest of 24% p.a., which on a loan of two weeks works out to approximately $4.60. Wage advance can work out to be a much cheaper alternative to payday loans, so it makes sense to look around to consider your options.

What are the Repayment Terms?

Payday loans have repayment periods between 16 days and one year. Be careful because some payday lenders specify minimum repayment terms of up to 6 months to make sure you keep paying fees every month.

With a pay advance with Wagetap, your advance is due to be repaid on the date of your next payday. You also have options to delay your repayment to your next payday or another date that suits you. With Wagetap, you can also split your repayment into smaller amounts and pay over multiple paydays. The best part is that these options are entirely free.

What are the Eligibility Requirements?

Payday lenders and wage advance providers like Wagetap have different eligibility requirements. Both will require you to provide them with your bank account statements, usually via a digital application, to make things easy. However, payday lenders will most likely also do a credit check to check your repayment history with other lenders and to check your credit score. This may adversely affect your credit score.

Wagetap doesn't do formal credit checks, keeping your credit score secure. However, Wagetap will still analyse your bank statement to ensure that you can afford to repay the loan. Because the eligibility requirements are different, it can make sense to check your eligibility for a loan before you apply. You can learn more about Wagetap’s eligibility here or download the app now App Store or Google Play to check how much you’re eligible for.

Which One is Right for Me?

It can be difficult to understand which products are best for you. You should understand the pros and cons of each and consider your personal situation before you take out a payday loan or an alternative to a payday loan like Wagetap. Any loan you take will need to be repaid, so consider your options carefully.

Download Wagetap to Get Started

App Store

Google Play

If you’re looking for a payday loan alternative, then a cash advance may be a better option. You can get access to up to $2,000 with Wagetap. Download the app to see if you’re eligible to get access to a pay advance today. Get started in only a few minutes by downloading now.