Payday Loans and Cash Advances: The Thin Line of Demarcation
Payday loans and cash advances are the most popular forms of short term loans for people who may not qualify for more conventional loans. Both types of loans can help individuals deal with emergencies or unforeseen problems. They provide a convenient way to get cash quickly without the credit check and other hassles. Here are some clarifications about the similarities and differences between these two types of quick loans.
Similarities Payday loans and cash advances are similar in many ways. They are sometimes used as interchangeable terms. Both types of loans are unsecured, meaning they do not require collateral. They also both have high interest rates, which can be twenty percent or higher.
The longer you take to repay the loan, the greater the risk of paying an even higher interest rate. Some financial planners might say only turn to either type of loan as a last resort. Another similarity is that they can both be acquired easily as long as you meet minimum requirements. Good credit is not required for either form of lending.
Benefits of Payday Loans The term "payday loan" acquired its name from the notion that the borrower was expected to pay back the loan, which is meant to be used for expenses between paychecks. It can be one of your best financial resources and an excellent option if you do not have a credit card. Payday loans typically amount from $100 to $1000 with the limits determined by state governments.
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Lenders do not have many requirements, as you mainly need to prove you have consistent monthly income. You will be expected to provide proof of employment, personal identification and a post-dated check for the repayment of the loan. The application process usually takes no more than a half hour.
Benefits of Cash Advances Cash advances are conventional loans offered by banks and credit card companies. The interest rate is often higher than the normal interest rate of a credit card. The cash advance balance is considered separate from other credit card balances. Some terms require that a cash advance is not repaid until the rest of your credit balance is paid down.
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The main benefit of a cash advance is that it usually does not have the same time limit for repayment as a payday loan, which is usually a few weeks. Even though a cash advance may have a high interest rate, payments can be spread out over several months.
Main Considerations High interest loans need to be repaid as soon as possible, otherwise it can turn into continuous debt. Fast cash loans are designed to be paid off in two weeks. If you repay the loans quickly, the interest rate will not be much of a factor. It is not a good idea to sign up for these loans if you have no way of paying them off quickly. A cash advance usually has an upfront fee, whereas the fees for payday loans are repaid on payday. It's possible that a payday loan can be less expensive than a cash advance.
The great thing about both types of loans is that you can turn to them without others finding out. You will not have to bother your friends and family about borrowing money. These financial options allow you to be in control of your financial situation. Payday loans are particularly helpful when you want to start a new business or give yourself a vacation. Cash advances can lead to spiraling debt because many times it's for much higher credit lines than allowed by payday loans. Money is often spent much faster than it is repaid.
Decide Your Own Plan After considering the differences between payday loans and cash advances you should pick the type of loan that best suits you. Pay attention to the terms so that you know exactly what you are agreeing to regarding repayment of the loan. Not all lenders are willing to help people with credit problems. Visit CashOne to learn about getting help during tough times.
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