When someone is expecting a paycheck or other form of cash but needs money now instead of on the scheduled pay date, a lender can provide a cash advance. The cash advance is directly deposited into the borrower’s bank account quickly, making the money convenient to access.
Basics of a Cash Advance
Applying for a cash advance is easier than applying for a loan through a bank. Bank loans can take weeks, but applications for cash advance loans are completed incredibly fast. The application process only takes a few minutes, and the borrower gets cash far sooner than with traditional loans.
General Terms of an Advance Loan
Cash loans between $100 and $1,000 are available online. The fees for payday advance loans range from $15 to $30 per $100 borrowed, depending on state law and other circumstances. The term of an advance cash loan is usually two to four weeks, and the loan and fee must usually be paid back in one lump sum. If you need more time to repay the amount you need, check out installment loans.
Cash Advances Versus Traditional Loans
Paycheck loans have two unique features over traditional loans in that they are unsecured loans, and often are approved with bad credit. This means that someone of little means or with a bad credit record can be approved in the case of a financial emergency.
Use Short Term Loans Wisely
Financially responsible people can use short term advance loans to save cash by avoiding late fees and overdraft charges. A loan in advance of your paycheck can also protect customers’ credit reports by allowing them to make payments on time.
When planning out your monthly budget, cash advance loans can offer an added cushion if there is no wiggle-room between income and expenses. When there is no room for error, having that credit available can offer added piece of mind, knowing that extra funds are there if you need them.
When to Use a Cash Advance
Emergencies happen, and here is where a cash online advance can really help. Not all of us have the luxury of a large savings account upon which to draw when an unexpected expense throws a monkey wrench in our budget. An online cash advance can mean the difference between paying the rent or a car payment late, or making those all-important payments on time.
Online loans can be directly deposited into your bank account after you and a lender reach an agreement. It’s as simple as filling out a brief form online and a short wait for the funds to be deposited.
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Cash Advance Categories
APR: The equivalent annualized percentage rate for payday loans and other short-term installment loans can have a very wide range and can vary based on the amount of the money borrowed and length of the loan. Make sure you understand all your terms and rates fully before every accepting any loans. If you were to annualize other fees in the same manner such as a returned check fee or a credit card late fee, your annual percentage could be astronomical.
Financial Implications: Short term payday loans are meant to be just that: Short term. Typical fees range from $15 to $351 for every $100 borrowed up to $500.00. (While these are typical fees, some lenders may charge more, and fees may be in addition to APR.) Fees per $100 begin dropping on loans larger than $500.00. Fees can sometimes be less than what borrowers can expect to pay for bouncing a check, having a utility disconnected, or paying a credit card bill late.
Collection Practices: Collection practices will vary from State to State and Lender to Lender. Some common methods if a loan becomes delinquent include, attempts at collections internally, primarily through telephone, an attempt to work out a pay-off arrangement that takes into strong consideration the financial condition of the borrower, and other internal attempts. Often, after all attempts at internal collections have failed, the lending agency may send the loan to a third party collection agency in an attempt to recover the funds lent in good faith, or may take other action within their legal rights. Check with your lender and your State regulations to be informed of the collection practices used by your lender.
Credit Score Impacts: Short term, payday loan lenders may rely on a credit reporting agency, and is not limited to any of the three (3) major rating agencies – Equifax, Experian, or Transunion. Generally, lenders will undertake some form of a credit check on a potential borrower, which may impact the borrower’s credit score. It may also impact the lender’s decision to extend credit. However, some lenders rely on information in addition to what is found in credit reports. The factors a lender considers when approving or denying a loan are solely in the lenders’ discretion. Moreover, the lenders decide what, if anything, to report to the credit reporting agencies. Short term lenders may also rely on their own scoring criteria, which is generally based on income and ability to repay, as well as the borrower’s payment history of any previous payday loans that have been made with the lender in question, or with other payday lenders.