Money When You Need It: Everything You Need to Know About Cash Advance

It’s good that we live in a world where you can get a cash advance when needed. So you don’t have to wait for your next paycheck or until payday to pay off the credit card bill that’s been eating away at your checking account. Instead, you can get the cash you need immediately and take care of whatever financial emergency arises.

But how does it work? How do you get one? And what should you expect from this kind of loan? This article will answer all of those questions and more.

What is a Cash Advance?

A cash advance is a loan that you can get from a bank, alternative lender, or a credit card issuer. If you choose the last one, you’re borrowing money against what you already have in your credit account, so you don’t need to get approved before receiving the funds. And if you take a cash advance from an alternative lender, it will work just like a payday loan you repay on your next paycheck.

Latoria Williams, the CEO of 1F Cash Advance, says “a cash advance has fees associated with it. The cash advance fees include interest, origination fees and other costs associated with borrowing money in your checking account. When using a cash advance service or an alternative lender, make sure to read the fine print so that you know exactly what kinds of fees for cash advances will be charged before accepting their offer.”

The cash advance is usually set at a high-interest rate, and it’s usually paid back over the subsequent two or four weeks. If you don’t repay it on time, it can affect your credit score.

How Does Cash Advance Work?

Cash advances are one of the fastest ways to get the money you need but they can also be the most expensive. Here’s how cash advances work:

1. Apply at your local payday lender. You must provide identification and proof that you can repay the loan before they process your application.
2. Receive your money. You can often receive your cash in as little as one hour after applying for the loan.
3. Pay back your loan. A large portion of your loan payment will go toward interest, so plan accordingly if you need to borrow again.

Cash Advance Example

If you’ve ever used a cash advance from your lender, you know that the process can be pretty quick and easy. But what exactly does it entail? Let’s go through an example together.

When to Take a Cash Advance?

You can get a cash advance from your lender when you need to cover an emergency expense (like an emergency car repair), an unexpected bill (like car insurance), or a special occasion (like Christmas). With one of these loans, you can borrow from your bank account without worrying about paying it back immediately. Instead, pay off your loan by the due date on your statement and avoid late cash advance fees.

How Do You Pay Back a Cash Advance?

When you take out a cash advance, the lender will deduct the loan amount and its costs from your bank account. It means you’ll need to be careful about how much money is in your account at due date or next paycheck

You can use your credit card to make payments on your bank cash advances until you’ve paid off the entire balance. Also, if you don’t have access to other funds but need a short-term solution until you get paid again, consider taking out a debt consolidation loan.

What is the Maximum Cash Advance Limit You Can Borrow?

The maximum amount you can get from a lender depends on your income and credit score. The maximum cash advance limit is typically from $100 to $500.

Does Cash Advance Hurt Your Credit?

The short answer is no. If you repay the money on time, they don’t affect your credit score. However, some lenders may check your cash advance loan applications and observe how often you request loans in a month. If this number exceeds three, it may be a problem for your credit score.

Alternatives to Cash Advances

Cash advances are a convenient way to get the cash you need, but they often come with high-interest rates and other fees. If you’re looking for alternatives to cash advances, here are some options to consider:

Borrow from Friends or Family Members

You might want to consider borrowing from friends or family as an alternative to taking out a cash advance. Not only does this option usually is for free, but it can help strengthen the bond between you and your loved ones.

Get a Personal Loan

One of the most significant benefits is that a personal loan has lower interest rates than cash advances. Cash advances typically have an annual percentage rate (APR) that might exceed 375%, whereas a personal loan can have an APR as low as 7%. 

Apply for Payday Alternative Loans

Compared to personal loans, payday alternative loans are short-term loans (usually between three and six months) that give you access to cash when needed. Unlike traditional payday loans and cash advances, these loans don’t have high-interest rates and fees. Instead, they rely on a simple interest rate calculated based on the amount borrowed and the time spent paying off the loan.

Cash Advance Apps

A cash advance app is an app that allows you to apply for a short-term loan quickly and easily. The loans are usually small, and they’re meant to help you pay for unexpected expenses or to get through a rough patch. Many of these apps don’t charge interest, but they may include fees such as monthly memberships.

Most cash advance apps provide a simple application process for cash advances. You just fill out basic information about your income, credit history, and employment status. Then you’ll get an answer within minutes.

Ask for a Paycheck Advance

Ask your boss about getting an early check or even splitting your next check into two payments: one at the end of this week and one that comes next week. Some employers will allow this as long as it’s not too much of a hassle for them.

Bottom Line

The most important thing to remember is that a cash advance can help you deal with unexpected expenses and stay on top of your bills—but it’s also important to be aware of the risks involved when you borrow a cash advance.

If you’re still unsure whether a cash advance is correct, we recommend doing additional research online and talking with a trusted financial advisor or friend.