- Cash advance loans are tempting and easy to get, but they come with high costs and risky hidden fees.
If you'd have anywhere else to turn for emergency cash, a cash advance loan might be a good – but only temporary – solution. Cash advance loans are not the same as payday loans or cash advance-of- of any kind.
Cash advance loans are short-term loans that are collateralized by your personal assets like credit cards, savings accounts, and other investments.
They can help you meet unexpected expenses or keep up with an upcoming bill until you receive your next paycheck. However, these loans carry very high-interest rates and hidden fees so it is important to understand all the details before agreeing on one.
The best way to avoid getting scammed by a cash advance lender is to know your options first. Read on to learn more about how cash advance vs payday loans work, which one is safer, and what to look out for when considering them. Virtual Reality
What is a Cash Advance Loan?
A cash advance loan is a short-term loan that is collateralized by your personal assets like credit cards, savings accounts, and other investments.
Cash advances are not to be confused with payday loans, cash advance loans, or any other kind of short-term loan.
A cash advance loan is typically a much smaller loan than a payday loan, but also has higher interest rates and hidden fees. The cash advance lender looks at your financial situation and determines how much you can borrow.
The amount will depend on your credit score, current debt load, and the value of your assets.
Cash advance loans can be a good option if you’re in a tight spot and need some extra cash, like when your car breaks down, you need to repair or replace your roof, or if you have to travel to see a sick family member.
They can also be a good choice if you’re saving up for a large expense, like a vacation, a home renovation project, or vehicle repairs.
How Does A Cash Advance Loan Work?
The lender will approve you for a specific amount based on your financial situation. You will write a personal check (or transfer money from a savings account) made out to the cash advance lender.
Their terms usually require you to repay the full amount within 30 days. The lender will then take your check and either deposit it into their account or cash it. If your check is deposited, it will be treated as a regular deposit to your account.
If the cash advance lender cashes your check, then it will be treated as a withdrawal from your account.
The cash advance lender will then use your assets as collateral to guarantee the loan. If you fail to repay the loan on time, the lender can access your assets to repay the loan. You will be responsible for paying a fee each time they access your account.
How Does A Payday Loan Work?
Payday loans are small short-term loans that are typically due in full by your next payday. The payday lender will approve you for a specific amount based on your financial situation.
You will sign a contract agreeing to repay the full amount within a few weeks. Next, the payday lender will take your check and either deposit it into their account or cash it. If your check is deposited, it will be treated as a regular deposit to your account.
If the payday lender cashes your check, then it will be treated as a withdrawal from your account. The payday lender will then use your account as collateral to guarantee the loan. If you fail to repay the loan on time, the lender can access your account to repay the loan. You will be responsible for paying a fee each time they access your account.
Payday Loan Safety Tips And Warnings!
The best way to avoid getting scammed by a cash advance lender is to know your options first. - Always read the terms and conditions – Don’t just sign the loan contract because you feel pressured to do so.
Instead, take your time to read the fine print and understand what you’re getting yourself into. What are the interest rates? Are there any hidden fees? What are the repayment terms?
How much is the total repayment amount? - Know your credit score – The better your credit score, the more likely you are to get a loan and the better the terms will be. A credit score is a number based on your credit history such as your loans and payment history, types of credit used, and how long you’ve had credit.
Check your credit score before and after taking out a loan to see how it is affected. - Don’t borrow more than you can repay – Take only what you need and make sure you can repay the loan in full before the due date. Borrowing more than you can repay will only land you in a worse situation.
- Research your other loan options – There are many ways to get cash without taking out a payday or cash advance loan. You can choose to use a savings account, line of credit, or home equity loan. Even asking friends and family for a small loan can be a better option than a payday loan.
Final Words: Know Your Rights Before Taking Out a Loan!
Before taking out any loan, it is important that you understand your rights and where you stand with your lender. This will help you make a better decision when choosing a cash advance lender.
Here are a few things to look out for when choosing a loan lender: - Loan terms – Make sure you understand how much the loan will cost you in interest and how long you have to repay it.
- Loan purpose – Make sure you only borrow what you need and that you are ready to repay it in full before the due date. - Loan repayment method – Will you have to make payments each month, or will the loan be due in one lump sum?
- Loan renewal policy – A loan renewal is when the lender extends or “renews” your loan even though you have yet to repay the first one. Ask your lender if they have a policy against renewal and what the terms are.
Know your rights before taking out a loan!
A cash advance loan is better than a payday loan, but both come with high-interest rates and hidden fees. The best way to avoid getting scammed is to know your options first.
Read the terms, know your credit score, and make sure that you’re only borrowing what you can repay! Now that you know the difference between a cash advance loan and a payday loan, you can make a better decision when choosing your next loan.