A cash advance loan is a short-term, unsecured loan designed to provide quick access to funds for borrowers in need of instant emergency cash.
Fun fact, it’s easier to find a cash advance payday loan store than it is to get a Big Mac.
According to the St. Louis Fed back in 2017, there were 14,348 payday loan storefronts in the United States. This was roughly the same number of Starbucks locations and slightly more than the 14,027 McDonald’s.
Like many, I’ve encountered situations where quick cash is helpful. I’ve been short on rent or needed extra cash to pay my electric bill before the next paycheck. However, after witnessing the consequences of a short-term cash advance loan on people close to me, I knew it was a slippery slope.
In this article, we’ll delve into various aspects of a quick cash advance loan, from hidden fees, online lenders to true costs and maximum amounts, providing you with the information needed to make an informed decision.
Types of Online Cash Advances
Online cash advances come in a few different forms. If you’re in need of a cash advance online, make sure you familiarize yourself with the following varieties:
Payday loans – Online payday loans are short-term cash advances that are usually paid back in a lump sum on the borrower’s next payday. Payday loans are known for being very expensive, short-term solutions.
Credit card advances – Credit card advances allow cardholders to withdraw money from their credit card account, usually with higher cost of borrowing than regular purchases.
Merchant cash advances – Merchant cash advances provide businesses with a lump sum of cash in exchange for a percentage of their future credit card sales.
The below table explores some of the features and rates associated with these types of online cash advances:¹,
– Short-term (usually 14-30 days) – No collateral required – Fast approval process
High – Fees and charges may apply
– Secured by the borrower’s vehicle title – Higher loan amounts compared to payday loans – Fast approval process
High – Fees and charges may apply
Online Cash Advance
– Online loan application – No collateral required – Fast approval process
High – Fees and charges may apply
– Longer repayment terms – Fixed monthly payments – No collateral required
– Typically lower than compared to payday loans – Fees and charges may apply
There are real advantages of instant cash
Quick Access to Funds -Processed quickly, with some cash advance lenders offering same or next day approval.
No Credit Check – Some quick cash advance loans are available to borrowers with bad credit or no credit, as lenders typically do not require a credit check.
No Collateral Needed – Typically unsecured, meaning they do not require collateral. Cash advance lenders offer unsecured loans based on the borrower’s promise to repay the money.
Real-Life Use Case Scenarios
Unexpected medical emergency: John’s wife suddenly falls ill and requires immediate medical attention. Their insurance doesn’t cover all the costs, and John needs to come up with additional funds quickly. Cash advances could provide the necessary funds to cover these unexpected medical expenses.
Car repairs: Sarah’s car breaks down, and she needs instant cash to repair it quickly to get to work. She doesn’t have enough savings to cover the costs, so she borrows quick cash to finance the repairs and get her car back on the road.
Home repairs: After a storm, a tree falls onto Maria’s house, causing significant damage to her roof. She needs quick cash to get it fixed before more damage is done, but she doesn’t have the money to cover the repair costs. A quick cash advance could help Maria pay for the emergency repairs while unemployed.
Utility bill: Tom has been struggling financially and has fallen behind on his utility bills. He receives a final notice stating that if he doesn’t pay the overdue balance, his electricity will be shut off. Tom can use some fast funding via a cash advance to cover the outstanding balance and avoid having his utilities disconnected.
- High interest rates – Cash advance fees are typically higher than those of traditional online loans. Payday loans are one example of an expensive cash advance.
- Short repayment period – An instant cash advance loan is usually paid back in a lump sum on the borrower’s next payday, which means the money will need to be repaid in a short time period.
- Risk of debt – The short repayment time and high interest can lead some cash advance borrowers to take out additional quick cash loans to repay the borrowed amount, creating the risk of a debt cycle.
Situations Where Short-Term Loans May Not Be Ideal
- Long-term needs: For ongoing financial needs, consider installment or balance transfer credit cards instead of instant cash loans.
- Repeat borrowing risk: If repayment of an instant cash advance might be challenging, avoid short-term loans to prevent a debt cycle.
- Alternative resources: Use an emergency fund or lower-interest credit if available instead of a quick cash advance.
- Non-essential purchases: Save up or explore lower-interest cash options for luxury items.
- Poor repayment history: Avoid taking out more instant cash loans, which could worsen your credit score and financial situation.
Eligibility Requirements for an Online Cash Advance
- Borrowers must be at least 18 years old and be a U.S. citizen or permanent resident.
- Borrowers must have a steady source of income, either through employment or another verifiable source.
- Borrowers must have an active checking account in good standing.
Instant Cash Advance Application Process
- Instant advance loans can be applied for online or in person with a storefront lender.
- Borrowers must provide proof of income, a valid government-issued I.D., and bank account information to get instant cash online.
- After submitting the required documentation for an instant cash advance, lenders will review the application and may approve the advance loan within a few minutes to a few hours.
Typical Repayment Terms
- For payday loans, the money is usually repaid in a lump sum on the borrower’s next payday.
- Cash advance repayment is typically done with a post-dated check or an automatic withdrawal from the borrower’s bank account.
- If cash advance borrowers are unable to repay the money on time, they may face late payment penalties and additional fees.
Regulations and Restrictions State and Federal Laws
All cash advance loans are regulated by state and federal laws, with some states banning them altogether.
**The Consumer Financial Protection Bureau (CFPB) is involved in regulating and protecting consumers from predatory lending practices.**
Some states impose restrictions on maximum loan amounts and fees.
- Maximum amount: $300
- Maximum finance charge: 15% of the total amount
- Maximum APR: 460% (based on a 14-day loan term)
- Maximum amount: $500
- Maximum finance charge: 10% of the total amount + a $5 verification fee
- Maximum APR: 304% (based on a 14-day loan term)
- Maximum amount: Not specified, but most lenders offer up to $1,000
- Maximum APR: 662% (based on a 14-day loan term)
- Maximum amount: $1,000 or 25% of the borrower’s gross monthly income, whichever is less
- Maximum finance charge: $15.50 per $100 borrowed
- Maximum APR: 404% (based on a 14-day loan term)
- Maximum amount: $1,000
- Maximum finance charge: 28% of the loan amount
- Maximum APR: 28% (based on a 14-day loan term)
At the time of publishing this information, it was up to date. We understand that rules and regulations regarding instant cash options can change quickly, so it is important to check with the NCSL database regularly.
Cash advance & payday lenders alternatives
- Personal loan – Short term online personal loans could provide low-income borrowers with longer-term financing at lower cost to borrow, which can be a more cost-effective solution than an advance loan for covering unexpected expenses available at a traditional bank, a credit union, or online lender.
- Savings account loans – Some banks and credit unions offer quick cash loans, allowing borrowers to borrow money against their savings account balance at a lower interest rate.
- Credit card balance transfers – Transferring high-interest debt to a credit card with a lower interest rate or promotional balance transfer offer can help borrowers save money on interest and pay off debt more quickly.
- Payment plans with creditors – Negotiating a payment plan with creditors can help borrowers manage their debt more effectively and avoid the high interest associated with payday loans.
- Emergency savings – Building and maintaining cash in an emergency savings fund can help borrowers instantly cover unexpected expenses without resorting to high-interest online payday loans.
- Borrowing from friends or family – Borrowing cash from friends or family can be a more affordable alternative to a cash advance loan, but it is important to have a clear repayment plan in place to avoid damaging relationships.
Cash Advance Loan FAQ
A cash advance is a financial tool that provides borrowers with an instant short-term loan that is usually repaid in a lump sum on the borrower’s next payday.
The interest rate and annual percentage rate of an online advance is typically higher than those of traditional loans. Fees may also be charged for processing the cash advance loan, and late payment penalties can apply if the borrower is unable to repay on time. Make sure you know the interest rate for your online advance loan.
The amount of money that can be borrowed through an advance loan is usually limited to a few hundred dollars, although some payday lenders may offer larger cash amounts.
Repayment of an advance is typically done with a post-dated check or an automatic withdrawal from the borrower’s bank account on the borrower’s next paycheck. It’s in your best interest to opt-in for overdraft protection if payment is automatic to avoid an NSF fee.
Generally speaking, once approved, instant payday loans are deposited into your bank account within 1-2 business days. This time frame may vary depending on the quick cash lender and your specific bank. Some lenders may offer same-day funding options for an additional fee.
An instant cash advance can be obtained as online loans or in-person. It is important to compare fast cash lenders and choose one that offers the most favorable terms and conditions, whether it’s a cash advance online or in person.
Restrictions on who can apply for an instant cash advance vary depending on state and federal regulations. Generally, borrowers must be at least 18 years old, have a steady source of income, and have an active checking account to get cash instantly.
Late repayment can lead to additional fees, known as late fees, being added to your loan balance. These details should be in your loan agreement. These fees vary by lender and state regulations, but they can be quite costly. Additionally, late payment may be reported to major credit bureaus and can negatively impact your credit score, making it more difficult to obtain instant credit in the future.
Annual Percentage Rate (APR) represents the annual cost of borrowing money, including finance charges and any additional fees, expressed as a percentage. APR allows borrowers to compare different loan offers more easily. Any personal loans, credit cards, or other financial products will have an APR associated with them.
As a personal finance writer, I want to stress the importance of considering all your options before choosing a quick loan solution, whether it’s a cash advance loan, installment loan, or credit card. While any type of cash advance or any payday advances can provide quick access to funds in emergency situations, they often come with high fees. It’s crucial to review all of your options when you’re in need of a cash loan.
CreditNinja, on the other hand, offers online loans that are designed to be a more affordable and manageable alternative. With flexible repayment terms, and a commitment to helping borrowers improve their financial well-being, CreditNinja is a trustworthy choice for those in need of financial assistance. By comparing your quick cash options and making an informed decision, you can work towards a brighter financial future.
For more information on cash advances and other loans, check out these resources:
Federal Trade Commission (FTC) – The FTC provides information on cash advance loans and alternative lending options. It also offers advice on avoiding scams and making informed financial decisions.
National Conference of State Legislatures (NCSL) – The NCSL provides information on payday lending statutes and regulations across the United States, which can be useful when discussing regional differences in cash advance loan restrictions.
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