Cash Advance Lending: How It WorksPeople who are cash-strapped during an emergency can find cash advance loans tempting, but are these short-term loans worth it? Discover how cash advances really work before deciding if one is right for you and your current financial situation.
What Are Cash Advance Loans?
Cash advances are short-term loans designed to get you through a cash emergency until your next payday. When you request this type of loan, the company will let you know when you need to pay back the full amount plus interest. Depending on when in your pay cycle you request the loan, you may be able to pay it back with your second check or even schedule your repayment for up to 30 days in the future.
How Do You Get a Cash Advance?
There are two ways to obtain a cash advance: in person or online. To get a payday loan through these companies, you will typically need to show a representative your most recent paystub, a recent utility bill indicating your current address, your driverís license or state identification card and your social security card. You will also need to bring in a check from your checking account, which you will need to write out to the loan company. Online loan companies usually have the added requirement that your paycheck be directly deposited into your checking account.
How Soon Can I Get My Money?
When you are approved for a cash advance at a local store, you can usually walk out with your money in hand after about 15 minutes. Online loan companies will deposit the money into your checking account, and the funds will usually be available to you on the following business day.
How Much Do Cash Advances Cost?
Cash advance loans bear unusually high interest rates, often carrying an annual percentage rate of more than 200%. Laws regarding payday loans and interest rates vary from state to state, and you will typically see a fee of $10-$20 for each $100 you borrow.
How Can Cash Advance Loans Be Used?
The cash you receive from a cash advance loan can be used for anything you want, without having to explain your needs to the loan company. Payday loans can be used for shopping, vacations or paying bills, but keep in mind the large fee associated with these short-term loans before you decide to request money for a shopping spree.
Cash advance loans can be useful for people who need money quickly and are able to pay it back with their next paychecks without a problem. Consider carefully if you can repay these loans quickly and whether you really need the money now or can wait until your next payday before you sign on the dotted line, because taking out new loans every pay period can make it difficult to get out from under them.