Anonymous
By Lauren Cordell
Whenever we need fast cash for personal or business needs, one of the first options that come to our minds is a cash advance. It’s very tempting, and people opt for it because it’s fast and easy. But, before you hurry off to the nearest bank or ATM to get it, you might want to know some things about cash advances first.
This article will help you understand what cash advances are, how they work, and the different types of cash advances. Remember that every cash advance has its pros and cons and is highly situational, so be sure to pick one that fits your needs.
What are Cash Advances and How Do They Work?
A cash advance is a short-term loan you can get from a traditional bank or an alternative lender. If you need a quick cash advance approval, you can apply for online loan with CreditNinja. The most popular type that people use is a credit card cash advance, which allows cardholders to withdraw a specific amount of cash from their credit line.
A cash advance has a high-interest rate and fees; it can quickly snowball into a huge debt if mishandled. This is because it’s a kind of unsecured loan and carries a high-interest rate. So carefully assess all the possibilities, and if you don’t want to take a cash advance, you can opt for a personal loan.
What are the different types of cash advance loans?
Credit Card Cash Advance
A cash advance from a credit card allows the cardholder to borrow a specific amount of money from their credit line. If you carry a card for your day-to-day spending, you may have encountered a situation where you couldn’t use your card and needed cash. It can be very frustrating and inconvenient, but a quick credit card cash advance can solve this problem.
If your credit card has a PIN, you can get a cash advance from an ATM. Otherwise, you have to go to a nearby bank, show your ID, and get it.
Easy as it might be, there are some things you have to remember while getting a credit card cash advance. Most banks don’t allow their clients to get the whole credit line as a cash advance. It’s mostly capped at a few hundred dollars. Also, you would have to pay several fees to get it, like ATM fees, cash advance fees, interest, etc.
Merchant Cash Advance
A merchant cash advance is a way for businesses to get additional funding in exchange for a percentage of their businesses’ income, usually through card transactions. The total amount you’ll have to pay is calculated based on the business’ general financial status.
The application is easy to get approved for as long as your business is creditworthy. The application and the approval are as fast as a single day. You can usually receive the money within a week at most. In addition, it’s an unsecured type of transaction, which means you don’t have to give up equipment or anything valuable as collateral.
However, depending on the law of the state in which you operate your business, you might be less protected. It’s because merchant cash advance regulations are not yet fully developed. While looking for a lender for a merchant cash advance, it would pay to research every option and pick a reputable and trustworthy one.
Payday Loans
Paydays are considered loans, but technically, they are a type of cash advance. It’s a type of short-term loan with a typically high-interest rate, which is meant to be paid off in full on your next payday. Its principal is usually a percentage of your paycheck.
Payday loans from AmOne are also unsecured, which means they don’t require collateral, but also because of this, they charge a higher than usual interest rate. Lenders don’t even call it interest because it’s a flat-fixed fee, typically ranging from $10 to $30 per $100 that you borrow.
Of course, just like any type of lending, it can still do your credit some damage if you don’t pay it. What makes it worse is when a collection agency takes hold of your debt. When that happens, you’ll see a significant dip in your credit score.
Final Words
Cash advances are convenient, fast, and easy to obtain. However, they tend to be expensive, especially if you don’t handle them properly. However, they are a good source of funding whenever you’re in a financial pinch.
