Introduction
In today’s ever-evolving financial landscape, you can encounter financial emergencies anytime. Suppose you are having a normal day, and suddenly, an unexpected expense comes up. A week is left for your monthly salary to be credited to your bank account. In these situations, you can apply for an online cash advance.
Cash advance options are gaining popularity owing to their convenience and ease of accessibility. One of the online cash advance types, the merchant cash advance market soared from $8 billion in 2016 to $19 billion in 2021. There are various types of online cash advances that you can opt for. Continue reading this blog post to learn everything about online cash advances and the best online cash advance options.
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What is a Cash Advance?
A cash advance is a short-term loan you can avail of in emergencies. These loans are availed for small amounts and are meant to be repaid within a short time frame. Nevertheless, it is still very popular among borrowers. Here are some reasons for its high popularity:
- Convenience and ease of accessibility
- Fast approval rates
- Quick processing time
- Absence of credit requirements.
Types of Cash Advances
Below are the most commonly used types of online cash advances that you can opt for:
1. Credit Card Cash Advances
This is the most popular type of cash advance. All you need is a credit card to avail of a cash advance. Credit card issuers allow their cardholders to withdraw a certain amount of cash.
However, it is important to note that credit card cash advances carry a much higher Annual Percentage Rate (APR) and fees than regular credit card purchases. Also, the interest on the principal amount begins to accrue as soon as you receive the cash. There is no grace period when it comes to credit card cash advances.
2. Merchant Cash Advances
This type of cash advance applies to merchants or corporations who do not have a perfect credit score. Businesses avail merchant cash advances to finance their operations. These cash advances are generally offered based on past sales and forecasts of future sales.
3. Payday Loans
Employees who receive monthly salaries can avail this type of cash advance. If an emergency arises suddenly, you can opt for these short-term loans and pay them back when you get your monthly salary.
You can obtain a payday loan by signing a postdated check (for the borrowed amount plus fees) to the lender. The payday lender cashes in the check only after the agreed-upon date. Some companies offer payday loans to their employees as an additional perk. The terms of the payday loans from your employer might vary.
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Risks and Considerations
There are many risks and considerations associated with online cash advances. Here are some of them that you should keep in mind while considering cash advances:
- Annual Percentage Rate (APR) - The first thing to consider while opting for cash advances is its associated interest rate. This interest makes up the primary component of the entire cost of borrowing.
- Repayment terms - You must understand the repayment terms carefully before borrowing money. If you are unable to pay back the loan on time, you will have to deal with late payment fees and compounded interest payments.
- Grace period - Most cash advances do not have any grace period. It implies that the interest on the principal amounts begins to accrue as soon as you get the money.
- Transaction fees - Some cash advances also carry a transaction fee in addition to APR. For instance, if you take out a credit card cash advance from an ATM, you will be charged a fixed transaction fee.
- Debt cycle - This is a major risk when borrowing money. If you are not careful, you must repeatedly borrow money to cover previous loans and their associated interests and fees.
- Local state regulations - You must be aware of the local state laws and regulations associated with cash advances. These regulations can vary from one state to another. For instance, payday cash advances are legal only in 26 out of 50 US states.
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Alternatives to Online Cash Advances
Online Cash Advances levy exorbitant interest rates from its applicants. Here are some alternatives to a cash advance that you can opt for:
- Personal Loan: Traditional personal loans are generally offered at better interest rates. The payback period is also more convenient than that of online cash advances. However, you need to ensure a good credit score to avail a personal loan.
- Credit Card: You can also use your credit card directly for emergencies, given that it is not already maxed out. The interest levied on credit card purchases is significantly lower than that on cash advances.
- Salary Advance: You can also request a salary advance from your employer. Some companies offer this facility to their employees to avail themselves of a portion of or their entire salary in advance.
- Borrowing from family or friends: You can also seek financial help from your friends and family. This is one of the most cost-effective ways to get instant cash in emergencies.
Tips for Responsible Borrowing
Below are some of the best tips to keep in mind while applying for an online cash advance:
- As discussed earlier, cash advances levy high interest rates on their applications. Therefore, you must borrow only in case of real emergencies. You should not opt for cash advances for shopping, vacations, etc.
- It is important to understand the terms and conditions of your cash advance issuer. These terms and conditions include information on interest rates, repayment schedules, etc, and can vary from one lender to another.
- Once you have availed an online cash advance, have a repayment plan. Failure to pay your dues on time can lead to even higher late payment fees and interest rates.
- Do not borrow more than what you can afford to repay.
- Try not to avail of multiple cash advances simultaneously.
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Conclusion
A cash advance is a popular tool to access instant cash in emergencies. It is helpful for someone who needs urgent cash and has a solid repayment plan. However, it should not be used for non-emergency reasons such as shopping, vacations, etc. However, it is still very popular among borrowers owing to its fast approval rates, quick processing time, and convenience.
There are various types of cash advances that you can apply for - Credit card cash advances, merchant cash advances, payday loans, etc. You must compare all the eligible cash advance options that you can apply and go for the one that suits you best. Before availing a cash advance, you should consider other alternative as well. Some common alternatives to cash advances include traditional personal loans, salary advances, direct credit card purchases, etc.
FAQs
1. Are online cash advances safe?
Yes, it is safe, provided you choose a licensed lender to make this transaction.
2. How quickly can I get an online cash advance?
The speed of fund disbursement depends on the lender’s policies and the type of cash advance opted. However, in most cases, you can expect the money within one or two business days.
3. Can I receive an online cash advance if I have a bad credit score?
Yes, you need to look for cash advance lenders who do not have credit score requirements for cash advances.
References
https://www.credible.com/blog/personal-loan/cash-advance-online/
https://www.cnbc.com/select/what-is-a-cash-advance-and-how-do-they-work/
https://www.bankrate.com/loans/personal-loans/online-cash-advance-alternatives/
https://time.com/personal-finance/article/what-is-a-cash-advance/
https://www.investopedia.com/terms/c/cashadvance.asp
https://joingerald.com/blog/what-is-a-cash-advance
https://www.thestate.com/news/business/article274421240.html
https://www.business.com/articles/how-cash-advance-works/
https://www.forbes.com/advisor/credit-cards/what-is-a-cash-advance-and-should-you-get-one/
