To tide through such unexpected emergencies, you may be forced to borrow. Some people turn to friends and family while others have to look for other alternative sources of funding. One such mode of financing is a cash advance loan.
Although it’s never a good idea to take an advance loan, it’s inevitable sometimes. If you truly have no choice but to take one, it’s crucial that you know what it entails.
In this article, you’ll learn more about cash advance loans.
So what are cash advance loans?
In simple terms, a cash advance is a short-term loan that you borrow using your credit card. So, instead of using your card to purchase goods or pay for services, you use it to get funds which you will refund, usually within two weeks.
They operate more like payday loans the only divergence is that while you’ll have to fulfill certain application requirements to get a payday loan, a cash advance is a short-term cash loan that you can take out using your credit card. You can apply for both loans online or in-store.
These loans may be convenient when you are desperate, but they are notoriously expensive. You, therefore, need to exercise caution when using them.
How expensive are cash loans?
The main drawback of cash advance loans is that they are exorbitant. You’ll have to pay a hefty amount to borrow money.
Below are some reasons why these loans are said to be expensive:
Upfront fees – you’ll have to pay $10- $20 or 3%-5% as a transaction fee, whichever is greater before taking out a cash advance. It may not be much, but remember you’ll have to pay interest on top.
High-interest rate – it’s cheaper to use your credit card to pay for goods and services than to borrow actual cash. According to lowcard.com, the APR for an average credit card advance is 22.11%. If your card is currently operating at an interest rate of 22%, you are likely to have a high APR should you decide to take a cash loan. On the other hand, a payday loan has an average APR of almost 400%; making it look like cash advances are better but both are bad deals. Another setback is that a cash advance loan begins to accrue interest immediately.
Short repayment period – you’ll have to repay your loan in full within 2 weeks. 15% per every $100 may look like a good deal, but the truth is you may not be able to pay it back within such a short time. Say you took a loan of $400. You’ll have to pay back $460 within 2 weeks of taking the loan. Suppose you earn $1000 per month, it means that from that paycheck, almost half of your pay will go to the payday lender. With bills to sort out, you may be forced to take another loan to get by until another paycheck. This then leaves you in endless debt.
How to apply for cash loans
Many lenders have simplified their application processes and borrowers can apply by filling out loan online application forms online or go to the lender’s physical office.
When applying for an online payday or cash advance loan online, you’ll need an active bank account or checking account, active contact details, proof of income, and be at least 18 years old. These are some of the basic requirement most lenders will ask for.
You don’t have to worry about your credit score because there will no credit checks. They are more concerned with your financial capacity to pay your loan rather than your credit score and history.
Once your loan request is approved, the lender will ask that you read the loan terms and conditions before appending your signature on the loan agreement form. If you agree to their terms, the loan funds will be credited to your bank account on the same working day.
Normally, the loan amount you are eligible to borrow will depend on your capacity to pay. the lenders’ terms and conditions vary, and there are some who are a bit flexible and can allow you longer repayment periods. Just make sure you do proper research and negotiate on the most affordable rates.
Low-interest personal loans from banks – you’ll need to work on your credit score to be eligible for a loan from banks or credit unions. They are cheaper than cash advances.
Borrow from friends and family – at least they will not be too hard on you and they may not charge late fees in case you default on payments.
If you decide that cash advances same day loans are your best modes of funding, work with reputable direct lenders who will not share your private information. You can fill up our online loan application request forms today and allow us to connect you with the most reputable moneylenders who will not only give you money but will help you get back your financial stability.