If some unexpected expense has come up, and it is still days away from payday, it is possible to take out a type of short-term loan known as a cash advance. A cash advance, or a payday loan, can help you if you are in a bind by using your upcoming paycheck as a guarantee for repayment. A cash advance is a quick way to get the money you need. However, it is important to know exactly what this type of loan is, what the terms are, and what the risks are before you decided to take this financial route.
A cash advance is a short-term, unsecured loan, usually granted for a smaller sum of money (less than $500). Taking out a cash advance is quick for a smaller amount of cash because there isnt the paperwork and approval process involved with which you would have to deal with longer-term bank loans. This can usually be done at a small check-cashing outlet or a pawnshop. And recently, more and more online lenders are getting involved with quick cash advances. The borrower promises to repay the loan from his or her next paycheck. The loan is made when the borrower either gives the lender a check or a debit authorization for the amount borrowed plus the finance charge. The lender consents to hold the check or authorization until the borrowers next payday. When payday comes, the lender may either cash the check, or the borrower may get his or her check back by paying the full loan amount and finance charge. It sounds easy, and with little consequence, but there are some things to be aware of.
If you are thinking about taking out a quick cash advance loan, you probably have very little cash flow to begin with, and few other alternatives. Know what you are getting into. The most important thing to be aware of is the finance charge that is applied to the loan upon borrowing. This fee can be as high as $50. So, if whatever you are taking out the cash advance for has a consequence less than the applicable fee, you might want to reconsider. And if you are not able to repay the loan right away, be aware that the interest you are charged continues to accrue, thus increasing the payoff amount (there is no refund of applied interest if the loan is repaid early). If this is not an issue, and you are able to pay the loan back immediately upon receipt of your paycheck, then perhaps a quick cash advance might be the solution for you.
There are times when a quick cash advance loan is not a smart option. Dont borrow money against your upcoming paycheck for impulse purchases, or just to have some cash in your pocket. This type of loan can get very expensive very quickly, especially if it is not paid back promptly. You will find yourself in more dire financial straits than before. Therefore, only utilize this type of service for serious or emergency financial situations. Unfortunately, some customers who take out quick cash advances often do so repeatedly, and often use it as a method of getting credit extension. This is possible by paying only the finance charge to the lender, and providing a new check or debit authorization repeatedly. Instead of a temporary financial crisis, many borrowers are experiencing continuing financial problems with which they apply a band-aid in the form of a quick cash advance loan. This is not wise.
A quick cash advance loan is only a quick solution to a short-term financial problem. If you have a bill that is due and do not want to risk hurting your credit rating, if you have an emergency medical bill that must be paid, or if you are in danger of bouncing a check, a cash advance may work for you. If you are aware of the finance charges you will have to repay in addition to the loan amount, and you are able to repay the loan immediately, this type of loan can be a useful, one-time solution to a tight financial state.