We live in a world absolutely controlled by money. We need money to buy food, provide a roof over our heads, and generally enjoy life. However, money can sometimes feel incredibly hard to come by, as nearly half of all Canadian employees live paycheck to paycheck.
However, there are solutions for people who are in a pinch, such as cash advances. But what is a cash advance? And when should you consider applying for one?
For all the answers to your questions about cash advances, keep reading.
What is a Cash Advance?
In this case, we’re talking about cash advance loans, often referred to as a payday loan. However, a cash advance can also refer to using your credit card like a debit card and taking out cash. This method of getting cash can be costly and limited, and is, therefore, not recommended unless absolutely necessary.
A cash advance loan works through a lender who provides a short-term loan to applicants. These are also called payday loans because many lenders require repayment as soon as the applicant receives their next paycheck. However, there are lenders who provide longer payback periods, up to 12 months.
When You Should and Shouldn’t Get a Cash Advance?
Any time you apply for a line of credit, you need to consider the costs and evaluate if it’s the best choice for you and your financial situation. This is just as true for a cash advance loan as it is for a house or car loan.
You should get a cash advance loan if you’re in an emergency situation and don’t have the money in your bank account to cover the costs. This could be mechanic costs of a surprise car repair, repair and maintenance issues in your home, veterinary bills, emergency hospital costs, etc.
If you want to know “What is a cash advance?” because you’re looking for quick and easy money to get a new TV, computer, designer clothes, etc., you’re looking for the wrong reason. A cash advance should never be used for frivolity or unnecessary expenses.
What Are the Pros and Cons of a Cash Advance?
One of the things you should consider when applying for a cash advance loan is the various pros and cons associated with them.
A cash advance loan is much easier to obtain than a traditional loan, as the credit check process is very forgiving and/or nonexistent. This makes it easy for people with poor credit to get the money they need. The process is typically much faster than obtaining a traditional loan as well.
However, a cash advance loan typically comes with an upfront fee, which can be percentage or flat-fee based (five percent of the loan or a determined amount). Additionally, the interest rates attached to cash advance loans are typically higher, as the lender is taking a larger risk by not doing in-depth credit checks.
Make sure you thoroughly read the terms and conditions of any loans, as you never want to be surprised by extra fees, penalties, etc.
Looking for More Advice or Information?
Now that you’ve found your answer to “What is a cash advance?” maybe we can help you with something else. Before you go, take some time to look through the rest of our articles. They’re full of helpful information and advice that could benefit your personal and professional life!