Salary Advance is a small, short-term unsecured loan that relies on the borrower having previous payroll and employment records. With a salary advance in Nigeria, you repay it either out of your next paycheck or over an agreed time span. It requires your employer’s permission and some companies restrict the circumstances under which they’ll green-light an advance.
Advantages of Salary Advance
Advantages for the borrower using this type of service are:
- The facility is continuing, readily available and can be used for any purpose.
- There is no need to re-negotiate a new loan for each present or future need.
- There is a fixed monthly payment which covers repayment of both principal and interest, so that borrowers knows the precise amount of their commitment each month.
- The cost of borrowing is less than most forms of installment finance.
- In some cases, when the borrowing facility is not required, the monthly transfers create an interest-bearing savings account.
How much can you borrow?
Typically up to N500,000, although some lenders restrict the size of the first loan they will offer. Loan periods start at less than a week and in some cases run to months. Social lender for example, offers borrowing over five days to five months, while Zedvance’s loan period starts at just a day and the maximum varies throughout the month. There are not usually early repayment charges, but there are fees for setting up the loan, as well as interest, which is usually calculated daily.
Salary advances or Loans?
- Loans are provided for long duration which is just opposite in the case of Advances.
- Loans allow you to borrow a larger amount than salary advances.