There are times when everyone needs access to quick cash that they don’t have on hand. Whether it’s to deal with a medical emergency, fund a major purchase, or even go on a much-needed vacation, there’s no wrong reason to take out a loan. However, borrowers need to make informed decisions about financial products.
What Are Cash Advances?
Cash advances are a perfect example. In the simplest terms, a Cash Advance is just a type of short-term loan. However, there are big differences between the cash advances offered by credit card companies versus specialized lenders.
When most people refer to cash advances, they’re talking about withdrawing money against their credit lines. While this approach to getting some quick cash offers fast approval and funding, credit card companies almost always charge extremely steep interest rates and fees.
The types of cash advances offered by specialized lenders usually offer a better deal, although they can still come with hefty fees. What differentiates cash advances from other forms of personal loans is that the lenders offering them don’t typically take into account the borrower’s credit score, which can be appealing for those with poor credit. Instead, they determine the loan amount based on state regulations and the size of an applicant’s paycheck.
Cash advances also differ from standard personal loans regarding loan terms. They typically have extremely short terms, which makes these specialized loans a good option for borrowers who need cash fast and have solid plans for paying it back equally quickly.
Impact on Credit Scores
While it’s true that cash advances don’t directly impact credit scores, they can eventually have detrimental effects. If people take out cash advances on their credit cards but don’t pay them back right away, for example, it can cause the balances on their cards to go up, which influences credit utilization rate reports. This, in turn, can impact a borrower’s eligibility for other types of loans.
Are Cash Advances Worth It?
Cash advances have developed something of a bad rap thanks to predatory payday lenders. However, they’re not inherently risky financial products. For some borrowers, cash advances offer the best deal. Those who would otherwise have to take out car title loans, for example, or request cash advances on credit cards, are almost always better off taking out short-term loans.
Cash advances aren’t the right option for everyone. People who have a history of financial instability and irresponsibility should think very carefully before taking out any kind of loan, including cash advances. They’re not good options for buying things that borrowers don’t need and can’t afford, nor should they be used to pay credit card bills.
Find the Right Financial Product
Borrowers shouldn’t have to settle for financial products that don’t perfectly fit their needs. Working with an online lender that offers short-term loans with reasonable interest rates is often the most effective option. They have less stringent eligibility criteria than traditional banks but do not engage in predatory practices, as is sometimes common in the local payday loan industries. Borrowers will find that it’s worth taking the time to investigate different lenders and products before deciding who to trust.
