Payroll advances are a benefit provided by some companies, so not everyone can access this scheme, but if your company does offer this benefit, follow the recommendations of the experts.
The pros and cons of advancing your payroll
One of the advantages of payroll advances is that people do not get into debt in the long term.
“This advance has a very low disposition cost purchased with a personal loan, for example. Then we could see it as a low financial cost,” said Gabriela Aguirre, Chief Financial Coach at Coru.
The specialist emphasizes that it is important to know that once you request financing, the next fortnight will not arrive completely, so you must consider this risk well and adjust your budget.
But one of the advantages of salary on demand is the cost, since some companies can charge up to 39 pesos to have your fortnight, while the interest rate of personal loans have rates of up to 78%, according to the simulator of the Condusef .
Aguirre pointed out that this scheme is only for emergencies and not for purchases such as Christmas gifts. “I think that asking for an advance for luxury items or treats is not the most recommended,” he said.
What is the difference between a payroll advance and a payroll loan?
One of the main differentiators is the term and commission charged. While the payroll advance is made based on the days you already worked, the payroll credit can be granted for an amount that multiplies your monthly salary.
The money you obtained through a payroll advance is paid on the next payment date (weekly, biweekly or monthly) and the payroll credit is paid in several monthly installments.
Another difference is that the payroll advance is made with an external institution affiliated with your company or employer, while the payroll loan is granted by the bank where you receive your payroll.
A payroll loan is usually recommended, according to Aguirre, to pay off debts such as credit cards (since plastics charge higher rates), and a payroll loan usually has a fixed rate and the cards have a variable rate.
Although Coru recommends using a payroll loan to buy a larger asset, he considers that it should be avoided in cases such as home remodeling.
“The destination of that credit is totally wrong because there are much more credits with much lower rates for the same destination,” he said.
The specialist recalled that the rates of a payroll loan are higher than those of a mortgage loan or a car loan, so it is better to compare options before requesting it.