How It Works
Cash advance loans can help you quickly receive loan funds
to pay for financial emergencies or tide you over to your next pay period.
There are two options: applying online or in person. If you choose to go to a
local cash advance company, you may be able to get money or a pre-funded debit
card on the spot. The downside is that if you don’t have all of the required
paperwork and documentation with you, you’ll have to go home and return again.
Plus, you’ll have to decide on the spot if your single loan offer works with
your budget and timeline.
A much more convenient method is using an online cash
advance company. You’ll receive an instant decision and can take your time
reviewing the loan terms, making sure you’re happy with the cost and that the
repayment term is feasible for you. Plus, you’ll have all of your financial and
employment information on hand to submit the necessary documents to finalize
your application.
Once you sign and return your loan agreement, you’ll receive
your loan funds. This is usually done via direct deposit into your bank
account. The funding time varies lender by lender, but most companies make it
happen within a day or two. If time is of the essence, apply with a lender who
can commit to a quick funding.
Because cash advance loans are meant to tide you over for
just a short period of time, the repayment period is frequently only a couple
of weeks or months long. You may need to repay the full amount in a single
payment, or they may be stretched out over multiple due dates. Check your loan
agreement before signing to make sure you understand how and when your loan
balance is due.
Fees to Expect
There are a few different ways a cash advance company may
structure their fees. If your loan is to be repaid as a single lump sum a few weeks
after you receive your funds, you’ll likely pay a set fee rather than an
ongoing interest rate. If you miss your payment, you may be able to rollover
the loan (although you can’t do this in every state). When you do a rollover,
you’ll be charged another flat fee, which is then added to your principal and
previous fee.
Let’s look at an example.
Say you borrow $500 with a $75 fee attached to it. You can’t
afford to repay that amount two weeks later on your due date, so you rollover
the loan. The lender charges you an additional $75 for this service, bringing
your grand total owed to $650. Some states limit how many times you can
rollover a cash advance or payday loan, otherwise you could easily end up
paying double the amount you initially borrowed.
Other cash advance lenders charge an interest rate,
especially if you’re borrowing a larger sum with payments spread out. In this
scenario, you’ll owe the same amount each month. The total interest calculated
to accrue is added to your principal balance, then divvied up over the
repayment term. If you pay off your loan balance early, you’ll save money on the
interest you would’ve paid in the future. Most companies these days don’t
charge prepayment penalties, but double check to be sure so you don’t get stuck
with extra fees.
If you miss a payment on a cash advance loan with multiple
payment dates, you’ll likely be charged a late fee. This can be charged either
as a flat fee (such as $15) or as a percentage of your amount due. So if your
monthly payment is $200 and you’re charged an extra 5%, your late fee would be
$10.
Other Options to Consider
Short-term financing can be expensive, and cash advance
loans are no exception. What other alternatives are there?
Credit Card Cash
Advance
One option is a credit card cash advance. Depending on your
card issuer, you may be able to withdraw cash from your credit card using an
ATM. This is more expensive than simply charging a purchase to your credit
card, but can be helpful if you need the money for something that can’t be paid
for using a credit card.
Debt Consolidation
Loan
If you’re having financial trouble because of excessive
debt, another option is applying for a debt consolidation loan. You may need a
slightly higher credit score to qualify (usually in the “average” category),
but this can help you manage your debt payments more easily by just having one
bill to pay, rather than multiple creditors each month.
You may even be able to qualify for a better rate and save
money in the long run, or spread out your payments over a longer period to help
relieve your monthly burden a bit more.
401(k) Loan
If you have a 401(k) with your employer, you can also
consider taking out a 401(k) loan. The plus side is that it doesn’t require a
credit check, since you’re essentially borrowing money from yourself. You also
have to repay the interest the funds would have accrued while in your account,
so you’re not hurting your retirement prospects too much.
You do, however, need to pay back the funds quickly,
otherwise you may be liable for paying taxes on the funds. Make sure you
understand all of the rules with this loan product in order to avoid taxes and
penalties. However, it could be a less costly option if you’re confident you
can keep up with your payments on time.
Frequently Asked Questions
What do you need to get a cash advance?
The exact details vary by lender, but common requirements include a form of ID, proof of income, and a bank statement. In some cases, you also may need a personal check to confirm your bank account information.
Do you need a bank account?
Some cash advance companies require a bank account for two reasons. The first is to deposit your funds and the second is so they can make an automatic withdrawal on your due date. If you find a cash advance lender with a physical location, you may be able to receive your funds as cash or a prepaid debit card, eliminating the need for a bank account.
How do you get cash from your credit card?
Some credit cards allow you to withdraw cash from an ATM and have that amount added to your outstanding balance. There’s generally no interest-free period and the rates are usually higher for this type of transaction.
Can you qualify with bad credit?
Yes, most cash advance companies work with people who have bad credit. You’ll likely need to meet some income requirements, though, so check these details before you apply.
Get a Cash Advance Today
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by Lauren Ward
Personal Finance Writer
Lauren Ward is a personal finance writer with nearly ten years of experience covering topics like loans, credit, and real estate. She lives in Virginia with her husband and three children.
