If you are desperately in need of some money, then one of your options is to get a cash advance. However, cash advances are not the best option in every situation and they can have some pretty dramatic drawbacks if used incorrectly. To help make sure that you are fully informed before diving in, here are some of the facts about cash advances:
What is a cash advance?
The basic idea of a cash advance (also known as a payday advance) is that you take out a small loan today from a company like Cash Depot Inc. and pay it back on your next payday. In other words, cash advances tend to be less than two weeks long as long as you make your payment on time. Many lending institutions also require that you sign a check when you take out the loan. This check is to be cashed in on your next payday, which increases the chances of the lender getting your money back. Since they have the check on hand, you don't need to worry about forgetting to get the payment to them on time.
However, you can still miss the payment if you don't have the necessary funds in your account when payday hits. If that happens for whatever reason, then the penalties may be severe.
What are the benefits of cash advances?
Ease of access is the biggest draw of cash advances, and for a pretty good reason. With other types of loans, you may need extensive documentation and then you may need to wait several days to see if your loan was approved or not. With cash advances, you can get money even if you have a poor credit score, and perhaps more importantly, you can get that money in a matter of minutes. In fact, you can even get cash advances from the comfort of your own home since so many lenders now have online presences.
What are the drawbacks of cash advances?
In many cases, the interest rate will be much higher than other types of loans. This means that you will end up paying more, but the cost is entirely manageable. However, that is only really the case when it comes to paying back the loan on time. If you take too long and fail to actually make the payment, then you could be hit with massive penalties. Late fees are easy to overlook when taking out a loan, especially if you are in a hurry to get the money now, so you definitely don't want to take any longer to pay off the loan than is absolutely necessary.