Cash advance is a short-term loan that individuals receive through their credit card company. Cash advance allows users to use the credit available to them to borrow money for use. If one is strapped for cash, they can pay fees to borrow from the credit company, regardless of whether they will receive their salary within the next week or two. Borrowers of cash advance loans are also obligated to repay the loan they acquire at specific interest rates.
A cash advance loan works by taking money from a person's remaining credit card limit. The credit card company where one seeks such a loan usually determines the individual's cash advance limit. This limit is a portion of one's credit card limit. Individuals in possession of credit cards having an available cash credit line on the cards are free to take out a cash advance until they reach the limit. Cash advances come in handy for users to pay debts. Such debts include credit card debt owed on a separate card.
A cash advance credit card and a payday loan are the ways individuals can borrow money. While a cash advance is only obtained via a credit card, a payday loan is acquired from online or in-store lenders. Payday loans have a quick turnaround time, and individuals receive them with minimal requirements.
One of the divergence points between these two loans is how much one can borrow. For instance, one can access a payday loan that ranges between $100 to $1000. Conversely, a cash advance loan confines borrowers to a certain percentage of their credit card limit.
Payday loans are also notorious for their ability to sink a borrower into heavy debt. This factor has pushed some state governments to legislate regulations to shield borrowers from falling victim to these loans. This explains why a consumer will often see a payday loan limit ranging between $100 to $1000. How much one can borrow using this type of loan also depends on the state where a borrower resides.
On the other hand, a cash advance loan limits the cash one can borrow to a percentage of their credit card limit. This amount usually sums up to a few hundred dollars. The credit cards may also have periodic cash advance limits. These periods could be daily, weekly, or monthly, with the daily limit not exceeding a maximum amount of $500.
Repaying a payday loan is also much sooner than a cash advance loan. A cash advance loan starts accruing interest immediately, but a borrower can carry the debt long-term if they prefer to do so. The immediate interest accrual also applies to a payday loan, but the repayment term depends on the lender from whom a borrower obtained a loan. Some lenders may issue borrowers more flexible loan repayment dates, while others require payment as soon as a person receives the next paycheck.
Another difference between cash advance loans and payday loans is the interest rates that apply to them. Cash advance loans require the borrower to pay an upfront fee, usually a fraction of the loan amount. The borrower then pays an approximate 24% annual percentage rate (APR). A lender charges a borrower an upfront fee depending on how much they borrow with a payday loan. For example, if one borrows a $100 payday loan, they pay a fee of about $15 to $30. Therefore, the APR of this loan is approximately 400% since a payday loan has a repayment window of about 14 days.
The following are the advantages of using cash advance loans:
While cash advance loans avail the above benefits to users, they could have some downsides that borrowers should consider before plunging themselves in headfirst. The following are the areas where cash advance loans could do better:
Borrowers can get a cash advance loan even when they have bad credit. This is because cash advance loan lenders usually don't perform credit checks on a borrower. If you need a cash advance loan, all you need to provide is your employment information, especially your pay stubs.
Cash advance loans don't have many requirements for one to be eligible to receive them. Applying for such a loan starts with the borrower filling out an online application form or a paper. Lenders need to see that the borrower has a prepaid debit card or an active bank account. They also require that the borrower be at least 18 years of age and have a source of income.
If the lender approves the loan, they give the borrower the loan they have applied for after deducting the fees. Lenders may require that the borrower write a check for the loan amount and the fees. At the next borrower's payday, the lender would cash the check or debit the checking amount for the amount borrowed plus any additional fees. The amount of money one can borrow can vary by the lender or the maximum loan limits set by the state government.
The following are the steps detailing how one can get a loan online on Empire Finance:
At first glance, a cash advance loan may seem like the quickest and easiest way to get money. However, this loan can have you covered in debt up to your neck, thanks to its pricey interest and fees. If you badly need money, seek better and much friendlier alternatives that won't deepen your financial woes. Try to familiarize yourself with the terms associated with this loan if it is your last option, but you should avoid it altogether.
The following are the alternatives to cash advance that one can source depending on their financial needs:
Cash advance fees are subject to interest rates and upfront fees. The interest rates for cash advance loans are often higher than balance transfers or purchases. A borrower's card issuer may also charge a cash advance fee. This fee typically ranges from 3-5% of the cash advance that the borrower requests.
Another fee is the bank or ATM fee, where a borrower pays a certain fee when taking out the loan. Cash advance loans have higher APRs than regular credit card purchases, and they immediately start accruing interest as soon as one receives the loan. The interest stops accumulating when the borrower repays the loan.
Unlike regular credit card transactions, cash advance loans don't have an interest-free grace period. This feature explains why the interest for cash advance loans starts accruing when an individual performs transactions using the loan. In contrast, credit card terms dictate when the interest starts to accrue once an individual makes purchases.