How the Cash Advance Works
Over the last couple of years the cash advance has become an increasingly popular financial solution. This can mainly be attributed to the worsening global credit crisis, with more and more people struggling with their finances and needing a short-term loan.
A cash advance is essentially just that a short-term loan. Some of the other names for this service are payday loan, cash til payday and payday advance, but there are countless others. The loans are aimed at bridging a financial gap, and covering unexpected and unforeseen costs.
The loans can vary from company to company, but usually range from $200 to around $1500. The time period of the loan can also vary, but does not usually exceed one month as the loan should be repaid on the date of the applicant’s next paycheck.
Providers of cash advances can commonly be found on the Internet, with companies such as Advance America and Personal Cash Advance some of the leaders in this field. The short-term loan is also becoming increasingly common with high-street lenders, and if an applicant is successful, the money is usually transferred into their bank account within 24 hours.
The main way in which the cash advance differs from a standard (unsecured) personal loan is that a credit check is not usually required in order to be approved for the loan. The main requirement is that the applicant has a regular job, makes at least $1,000 a month, and is at least 18 years of age. They will need to also prove the date of their next payday by producing a recent pay slip.
There are advantages and disadvantages of this type of loan. A cash advance is best advised when a customer has an upcoming payment to make on a personal loan or credit card, and they do not have the funds to cover the amount. A short-term loan will prevent the customer from accumulating missed payment and late fees, and avoid their credit rating taking a hit.
The cash advance could also be advised when a small amount of money is needed to cover unforeseen expenses, such as medical bills or household repair bills. As long as the repayment can be comfortably made the following month, this type of loan is a viable option.
Despite its attraction, those considering a payday loan should be aware of the high APR that they will be charged. Even an apparently small amount of interest such as $18 on a loan of $200 over a one month period, can work out at an extremely high rate of interest when looked at in terms of APR.
In summary, a cash advance is an option worth considering for those that need to bridge a short-term financial gap, but is not recommended for those that have more long-term budget problems. More suitable options for those in this situation are speaking to a qualified financial advisor, and a low-interest long-term loan.
For more about a payday cash advance visit we also have information about the top prepaid cards available.