Are you faced with an unexpected expense? A necessary car repair? A medical bill? Money to pay rent or for groceries? A cash advance on your credit card is tempting. It’s usually quick and easy. Often as simple as putting your credit card into an ATM and getting cash out.
It’s not quite the same as taking money out of your checking account, though. A cash advance is much like a payday loan no credit check. You’re going to pay that entire amount back and then some.
If you’re in a truly dire financial situation, a cash advance loan might be your only option, but make sure you are fully informed before you take one. Here are 7 questions to ask yourself if you’re considering it.
Cash Advance Loans: Ask Yourself These Questions
Before taking a cash advance loan for bad credit, ask yourself these questions, and if it still sounds like a necessary expense and reasonable choice, proceed with the loan.
1. What Are the Fees?
Credit card companies are for-profit businesses. Their goal is to make money, so they’re not going to just lend you money without a high return on their investment. The majority of cards require you to pay a cash advance fee. This amount can vary, but it’s typically either a flat fee or a percentage of the advance amount.
Even if you pay off the advance quickly, you’ll still have to pay the fee. This is unavoidable. Make sure you know how much the advance is really going to cost you.
2. What Is the APR?
Not only are there high fees, but cash advance loans also have much higher APR rates than most other loans like installment loans. Because there is no credit check, they are meant to be a sort of same day payday loan. An “advance” until you get your paycheck or money that you are expecting.
The APR is usually very high and the longer you take to pay it back, the more money it’s going to cost you. Compared to other loans, the cost of a cash advance loan is much higher once you consider the fees and APR.
3. How Long Will It Take to Pay It Back?
Cash advance loans are meant to be a short-term option. The amount of money available is typically a few hundred dollars and meant to be paid back in a few weeks, not over a few months or longer.
Most credit card purchases come with a grace period, meaning you don’t start accruing interest right away. Rather, you only have to pay interest if you don’t pay your bill in full by the due date.
With cash advances, the interest starts accruing from day one. There is no grace period and the interest increases every day until you pay it off. To avoid this, pay off any amount you can as soon as you can.
4. Is This My Only Option?
If there is an option other than a cash advance, take it. Borrow from friends or family, take out a small personal loan if the terms are right, or see if the expense can be paid with a check if you have the money on hand. P2P lending might also be an option for fast cash as well.
With Peer-to-Peer lending, anyone can join a P2P platform and loan money to people in exchange for interest. P2P loans are crowdsourced, so your money comes from a variety of different lenders. This ensures that no one person take a large financial hit if you don’t pay back your loan.
You don’t get the money as quickly as you would with a cash advance loan, but the interest rates are typically much lower.
5. Is This Expense Totally Necessary?
A broken down car which makes you unable to go to work or school is a necessary expense. A vacation is not. Think about what you need the money for and how necessary the expense is. Do you want to pay high fees and a high APR for a frivolous expense?
6. Is There a Grace Period?
Most of the time there is no grace period when it comes to cash advance loans. Double check your credit card terms so you understand exactly when you’ll start accruing interesting and when you’ll be charged the cash advance fee.
7. Do I Need Financial Help?
The bigger question when it comes to considering a cash advance loan is why you are in this situation. Do you have an emergency fund? If not, consider setting aside a small amount of money each week or every time you get paid to cover any unexpected expenses.
If the money is needed for regular monthly expenses, like rent, your car payment, or groceries, it’s time to reevaluate your budget. If this is a one-time financial emergency, then your budget might not be in terrible shape.
However, if you find yourself in this situation regularly, you need to determine how to reduce your expenses or increase your income, or both. A Pattern of cash advance or same-day loans could signal the need for larger financial changes in your life.
The Bottom Line
If after going through these questions, you still feel that you are in need of a cash advance loan and it’s your only option, you should do it.
If it’s a one-time thing, a true emergency expense, and you can pay it back quickly, it might not be the most terrible option. However, if there are other options available to you, explore them and use this as a last resort.
You can learn more about different loans and credit cards on some of our other pages. We have resources for all of your financial needs. Take a look around. Here are some other articles you might find helpful:
Your guide to payday loans online no credit check instant approval same day cash
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Payday loans with a prepaid debit card – how to get one when you only have a debit card
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