What is a cash advance?
A cash advance is a short-term loan that people receive through a credit card company. A cash advance allows people to use the credit they have to get a loan. If a person is short of money, he or she can pay a fee to get a loan from the credit card company, regardless of whether or not he or she receives a paycheck in the next week or two. Borrowers are also required to repay the acquired loan at specific interest rates.
A cash loan works by withdrawing money from the remaining limit of a person's credit card. The credit card company from which the loan is applied for usually determines the customer's cash advance limit. This limit is part of the credit card limit. Credit card holders who have an available line of credit on their cards are free to apply for a cash advance until the limit is reached. Cash advances are useful for users to pay off debts. These debts include credit card debts owed to another card.
Differences between cash advances and short-term loans
A cash advance credit card and a payday loan are ways in which individuals can borrow money. While a cash advance is obtained only through a credit card, a payday loan is obtained from online lenders or in stores. Short-term loans have fast turnaround times and are granted with minimal requirements.
One of the points of difference between these two loans is the amount you can borrow. For example, a payday loan can be obtained for between $100 and $1,000. In contrast, a cash loan limits borrowers to a certain percentage of their credit card limit.
Short-term loans are also known for their ability to push the borrower into significant debt. This factor has led some state governments to legislate to prevent borrowers from being victimized by these loans. This explains why a consumer often sees a payday loan limit ranging from $100 to $1,000. The amount one can borrow with this type of loan also depends on the state in which the borrower resides.
On the other hand, a cash loan limits the money that can be borrowed to a percentage of the credit card limit. The amount is usually a few hundred dollars. Credit cards may also provide periodic limits to cash advances. These periods can be daily, weekly, or monthly, with a daily limit of no more than $500.
Repayment of a payday loan is also much faster than a cash advance. A cash loan begins accruing interest immediately, but the borrower can carry the debt forward over the long term if desired. Immediate interest accrual also applies to a payday loan, but the repayment period depends on the lender from whom the borrower obtained the loan. Some lenders may give borrowers more flexible repayment dates, while others require payment as soon as the next paycheck is received.
Another difference between cash loans and payday loans is the interest rate charged. Cash loans require payment of an initial fee, usually a fraction of the loan amount. The borrower then pays an annual percentage rate (APR) of about 24 percent. The lender charges an upfront fee to the borrower based on the amount of money borrowed with a payday loan. For example, if a person borrows a $100 loan, he or she pays a fee of about $15 to $30. Therefore, the APR on this loan is about 400% because a payday loan has a repayment window of about 14 days.
Advantages of using cash advances
The advantages of using cash advances are as follows:
- They are quick to obtain. This is perhaps the most outstanding feature of a cash loan. The loan allows users to access it quickly, eliminating the need to go through laborious approval processes. As a result, borrowers receive the money immediately in their account without waiting for banks to service it.
- Credit does not restrict borrowers from borrowing. With a cash advance, the borrower does not have to worry about his or her credit being a major approval factor in determining whether or not to receive the loan. A particular cash advance loan limits individuals based on their credit card funds, but borrowers don't have to apply for new credit to benefit from it.
- They are easily accessible. You don't need to file endless paperwork to qualify for a cash advance loan. Individuals appreciate that they do not need collateral for the loan.
Although cash advance loans offer the above advantages to users, they can have some disadvantages that borrowers should consider before diving headlong into it. Here are areas where cash advance loans could do better:
- Heavy financial burdens. Although people get these loans quickly, the interest rates and fees are quite high. For example, you can pay a loan fee of 300-500% APR.
- The inability to build your own credit. Although it is worth noting that lenders do not focus on a person's credit history, the loan does not create the borrower's credit. This is because affected lenders generally do not report a borrower's payments to the credit card bureaus.
- The ability of the loan to trap a borrower in debt. Considering the large expenses mentioned above, a person may not repay the loan on time. A lender can then offer the borrower a new loan with a new commission to refinance the debt.
- Familiarize yourself with the cash advance lenders available. There are many on the market, including cash advance apps. Advance America is one of the reputable lenders that facilitates a transparent and reliable cash advance loan process.
- Determine the maximum amount of cash advance loan you need. This helps you analyze whether the amount you will borrow will be enough to meet your needs.
- Calculate the interest, fees and penalties you may face when you take out the loan. This prepares you mentally and helps you avoid unexpected financial surprises that might come with the loan.
- Complete the online application by entering your details, including name, social security number, and contact information.
- Once approved by the lender, you are now eligible to receive the money. The most convenient way to receive funds is direct deposit to your bank account.
- Calculate your loan repayment schedule to avoid tarnishing your credit score, taking on more debt or paying late fees.
Cash advance loan with bad credit
Borrowers can get a cash advance even if they have bad credit. This is because cash advance loan lenders generally do not perform credit checks on a borrower. If you need a cash advance, all you have to do is provide employment information, especially pay stubs.
Are you eligible for cash advance loans?
Cash advance loans do not have many requirements in order to receive them. Applying for such a loan begins with the borrower filling in an online application form or document. Lenders must ensure that the borrower has a prepaid debit card or an active bank account. They also require the borrower to be at least 18 years old and have a source of income.
If the lender approves the loan, he grants the borrower the loan he requested after deducting the fees. Lenders may require the borrower to write a check for the loan amount and fees. On the borrower's next payday, the lender would cash the check or debit the check amount for the amount borrowed plus any additional fees. The amount of money you can borrow can vary depending on the lender or the maximum loan limits set by the state government.
Easily apply for a loan online
Below are the steps detailing how to get a loan online at Loan Lucky:
At first glance, a cash advance loan may seem like the quickest and easiest way to get cash. However, this loan can make you pay debt up to your neck, thanks to its expensive interest and fees. If you are in dire need of cash, look for better and much friendlier alternatives that do not aggravate your financial problems. Try to familiarize yourself with the terms associated with this loan if it is your last resort, but you should avoid it altogether.