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Cash advance is a form of short term loan either gotten from banks or alternative lenders. Cash advance is also a service rendered by credit card companies to its clients where it allows client to borrow money from their credit cards.
This can be an expensive way of getting money that you need but its convenience keeps the borrowers interest in it.
Unlike taking cash from your bank account, cash advance requires you to pay back. You use your credit card to buy cash instead and not goods and services.
If you are someone who uses only credit cards for daily purchases, it will get to a point where you would need cash.
In that case, you would only have to go in for a cash advance. When people need paper cash but also don’t have enough in their account, they turn to cash advances.
How Cash Advance works
You can get cash advance usually directly from the ATM. If you cannot get it directly from the ATM, you can walk into your banks office and show an ID to get assistance to get the cash.
With cash advance, you will not be allowed to draw the full amount. You will have access to a few hundred dollars when using credit card cash advance. Therefore you cannot rely on it fully as your source of funding.
Maybe with online cash advance and merchant cash advance, you can draw higher amounts. It will all depend on the lender you are dealing with and the state of your finances.
The cost of cash advance
Cash advance doesn’t come cheap as you would have already noticed. There is an interest rate and cash advance fees.
Lenders charge between 3 – 5% of the amount advanced to you. It is better to ask your lender so you will know exactly how much it will cost you for the cash advance you are taking.
There is no grace period on a cash advance. This means the interest on them begin to accrue the moment the transaction is done.
Sometimes even with a zero balance, there can be finance charges on the cash advance you take. It is therefore important to pay off the cash advance before its time is due to avoid extra expenses.
How to limit the fees that come with cash advance
Understand the transaction fees
This will enable you to adjust accordingly when its time to pay back the loan. Some transaction fees come as a percentage of the total amount that you took.
When that happens, you can limit the amount to pay by taking only what you need.
The less you take, the less that you have to pay as fees and vice versa.
In other cases you are charged a flat rate ( an fixed amount of payment that is made by all despite the amount involved) or a mixture of a flat rate and also a percentage.
You would just have to prepare for which one the lender will put forward.
Make a plan for your repayment
With normal credit card purchases, there is a grace period between when you use the card to make a purchase and the date when you pay interest.
But with cash advance, the interest begins immediately. That implies that paying off the amount owed on time is important to ensure that you do not have a huge amount to pay at the end of it all.
Types of Cash advance
Merchant Cash Advance
Business owners who need quick cash for use have the option of merchant cash advances to choose from. You assess the need for your capital and choose the amount that will be enough for you.
With merchant cash advances, the lender will give you a lump sum of money against the future sales that the company will make. This is usually after assessing your credit card sales and your credit score
It is money that is given against future profits of the company. It is best used for temporary shortfalls in cash and not necessarily relying on it as the only capital source for the business.
It will be a good practice to understand what merchant cash advance entails with its costs before you end up selling all of your profits to the lender.
Merchant cash advance do not have similar regulations as the traditional lenders, hence they can charge you any amount of interest.
You should therefore read any document that will be given to you concerning the terms and conditions.
Merchant cash advance can be a good alternative for businesses that are new and do not have cash for regular payments. Merchant cash advance are not paid back with fixed monthly installments but the credit card receipts.
Quick Cash Advance
Cash advance used to be available only for those with good credit scores but now, there are. These loans are approved in the shortest possible time. Cash advances are offered even to the unemployed.
The only factor that comes into play is the interest to be paid and a steady income source. Lenders who give quick cash advance have differing rates especially if they consider you a risk to lend to.
Before taking quick cash advance you would have to consider how soon you would be able to pay back.
Online Cash Advance
Getting cash advance online is increasingly becoming easier for people looking for loans or funds for their emergencies.
With online cash advance, every transaction that is carried out between the individual and the loan company is done online.
You do not necessarily need to walk into the office before you get what you want from the lender.
It may only be in some special cases that you may be required to go to the lenders office if they are not too clear with the details you have provided.
A lender will require your recent pay stub, an operational checking account that is in good standing (no returned check for up to 3 months).
Other requirements include being18 years and above at the time of applying, should have been living in your current residence for a duration of less than 3 months. In some cases the lender requires that you earn not less than $1000 a month.
After providing these details, the lender can then assess your application. When you meet the minimum requirements, you will be successful in getting online cash advance from lenders.
Online cash advance can be one of the quickest routes you can choose to get cash to solve emergencies and other financial situations.
Credit Card Cash Advance
Credit card cash advance refers to withdrawing cash from a credit card account you hold.
It simply means going in for cash from your credit card for personal use. There is a limit on the amount you can draw.
You can go to your banks ATM to take money when you need it. Its just like withdrawing money from your debit card. But with a debit card you are having access to your own funds. With cash advance the card issuer is lending you their money; it will cost you.
Credit card cash advance comes with high transaction fees and annual percentage rate (APR). It is a source of emergency funding when it happens that you are short of funds. You should however, consider your options before finally choosing credit card cash advance.
Cash advance is available for those with bad credit
The unexpected happens to even the most hardworking of people. You can run out of cash before the month ends. Sounds familiar? I’m sure it does.
The case is that when you have bad credit, it makes even getting loans a bit difficult because your credit score does not enable you to get loans when you need them.
There’s no need to hesitate to apply for cash advance if you have bad credit. Cash advance lenders sometimes do not conduct credit checks before the loan is given.
What they do is to just do a background check to know that you are not defaulting in another cash advance loan elsewhere. Others may use verification services to check whether you have any returned or bounced checks.
How much to borrow and the fees that the lender may charge differs among lenders. It is your duty to find out which one you can afford and subscribe to it.
You can additionally find out the possibility of extending the loan beyond the original term that was agreed upon should in case you will not be able to make regular payments as you anticipated.
This is to prevent you from any further surprises from the lender in the near future. With cash advance, bad credit does not stand in your way.
Ask the relevant questions pertaining to the agreement you will be signing. You have the sole choice of deciding which lender to choose.
Accessing cash advance
Cash advance in the hand of someone experiencing financial trouble is a timely tool. You would have to ,however, use it well.
Cash advance sometimes comes in the form of payday loans and are to be used as a lender of last resort. Try to find funds elsewhere before turning to cash advance. You can still go in for it anyway provided you have prepared yourself for the interest rates that are high.
Cash advance was not designed as a long-term finance option. Therefore you are expected to pay back the full amount immediately the time is due so that your interest does not accumulate.
This will save you from paying any late fees and other charges. One thing you would also want to avoid is defaulting and having to take another cash advance to pay for the first.
You have options to avoid taking a cash advance
If you really do not need it, don’t buy it.
This is crucial in saving you from buying things you don’t need and overspending. When you have the credit card also, you should check its use in order not to end up with a spending spree that will take time to pay back.
Purchase with your credit card.
It’s better to use your card to make purchases than if you go in for a cash advance. Charging purchases to your card will enable you to limit the interest and other fees that you will have to pay. Cash advance can be your last resort when you are hard up for money.
Monitor your balance.
If running low on funds is your main concern, then it will be good to monitor the balance on your account. This is because it will notify you of how much you have left and help you to make the decision on how you are going to manage your finances. This can be done either through email, text messaging.
Consider other alternatives.
If you are thinking of getting cash advance due to the convenience it brings, you have to look at the other options you have before finally considering it
If you find yourself in a cash-only zone, you might be tempted to use cash advances but if you prepare ahead of time, you can avoid going in for it altogether.
For businesses that also want to expand, there is an option for business loans to take care of their expenses rather than merchant cash advances. This can help as an alternative to merchant cash advance.
You should try all possible means to lessen how much you spend on credit.
If it will include making adjustments now so that later you will not have the burden of paying back loans, in the long-run it will be worthwhile.
You can either choose small loans from the credit union, bank or family member. Another alternative is to get a payday advance from where you work. Another option is to opt for credit counselling or enrolling into a local emergency hardship programme.
• Go in for peer-to-peer loans
Peer-to -peer loans have increasingly become a popular option for those in need of cash advance when all other options have not been successful. It is a system of borrowing where individuals borrow money from other individuals or investors. The credit requirements are not stringent and it is easy for you to be approved.
Benefits of Cash Advance
• You can get your money within 24 -48 hours of applying
• No stringent credit checks and background checks. The evidence of your qualification is your ability to prove that you have a steady income.
• The online component that has been introduced to lending allows inquiries to be made through the web, email or through a phone call. A lot of business are now expanding their services to accommodate online transactions.
• Collateral is not usually requested for. The main priority of the lender is your ability to pay back.
• Sometimes, those without bank accounts are not left out. There are other alternative arrangements made to ensure that they get their funds.
• You can receive referral bonuses from some of the cash advance companies.
• Those in good standing do not struggle to apply for other loans after they have previously applied for cash advance. The lender will only check the repayment history.
When you meet the eligibility requirements below, you can get cash advance
– You should be 18 years and older at the time of application
– You must have held your current job for 3 months and over
– Your checking account should have been active for 3 months without returned or checks that have been bounced.
– Proof of residency in the country you are applying from will also be required.
Ways to handle cash advance
If all comes to the worst and you still have to go in for cash advance, there are smart ways to manage the situation. The following are some of the steps you can take to avoid getting into debt.
• Use cash advance for only purchases that you cant pay for with your credit card. Cash advance are not to be used for everyday items like grocery shopping or gas
• Read the credit agreement before signing on. You would have to understand the terms and fees that are found in the agreement. In case of emergencies, you can ask a customer service representative who will be able to help you with the information you need.
• Know your limit. You can find out from your online account or calling in to your bank to speak to an operator. This will let you know when you are exceeding your limit. When you exceed your cash advance limit, it can result in high interest rates to be paid.
• If you’re choosing a credit cash advance, use your credit card that has a zero balance. This will give you enough time to plan your repayment and not have accumulated interest.
• Limit your purchases until the cash advance is paid back. An inability to pay back credit that is used especially from credit cards can spell doom for your finances. Due to that, you should not make any purchases. The temptation to take just a little more than you can take since it is extra money. It is better to take a cash advance once and for all to cover the expense.
Payday loans as an example of cash advance
Payday loans are short-term cash advances that can be borrowed without stringent credit checks.
You pay back within 14 days when you receive your paycheck. It is has been found out that 12 million Americans take payday loans.
About 50 percent of those who take these loans are not able to pay back their loans within some years of taking them. The average borrower who takes payday loans sometimes is not able to pay back as soon as desired. The difficulty with payday loans is that getting back on track with payments can be a long process.
When the time is due and you cannot make the payment in person, the lender will try to deduct it from your bank account. The problem comes in if there are insufficient funds and your lender keeps trying to deduct the money.
You will be charged for insufficient funds and this will add up to your debt.
When this situation continues for long the bank will begin to call to take the payment from you. The more it delays, the fees, interest and penalties can increase. Within 60 days if you are not able to pay, you would be turned over to a third-party to collect the payment.
This is where your credit can be affected. Every action from the collection agency is recorded on your credit report. Defaulting on payday loans as a cash advance can adversely affect your credit score. Plus if your checking account is also in the negative it compounds the situation.
To prevent this situation from going any further, it is best to pay the loans you take on time to prevent any action from the lender or debt collector.
This will ensure that you are not hounded unlawfully for the payday loan.
There are alternatives to cash advance that can be explored. These include selling some of your items in order to get some cash to support yourself or your finances.
Whether it’s in front of your house or online. Slash some prices and put the items out there. Someone would be interested in it and you can raise some cash.
Living within your means will also help to lower your expenses great and you can save more.
Beware of scammers who may prey on your desperation for the need for a loan.
A savings habit when cultivated will help you a great deal when you are in financial distress. It serves an emergency fund for unexpected expenses.
You can also set up an emergency fund for your expenses. This can be through issuing automatic deductions from your checking account.
Or you can try activities that will bring you extra income on the side.
But if you are still in dire need of cash advance when you have no money on you, look out for lenders who will not charge ATM fees or other kinds of fees.
Disclaimer: All loans offered through this website are subject to credit and underwriting approval. AfterLoans.ca is a lead referral company, not a lender. AfterLoans only works with financial service providers that adhere to Canadian laws and regulations. Our lenders lend from $500-$5,000. Loans amortization is between 6-36 months. APRs range from 19.99% to 55%. The actual APR charged will depend on the lender’s assessment of your credit profile. For example, on a $1000 loan borrowed for 12 months at 29.9%, the monthly payment will be $97.24; with a total repayment, including interest, of $1166.88 There is also lender’s optional loan protection policy. In the event of a missed payment an insufficient funds fee of around 45$ may be charged (dependent on the lender). If you default on your loan payment plan the lender may terminate the plan and the remaining balance will become payable immediately. Our lenders employ fair debt collection practices, but will pursue the payment of Outstanding debts to the full extent that Canadian law allows.