Paying off Credit Cards with a Cash Advance Loan


Cash advance loans, sometimes referred to as payday loans, are on the rise and for a number of reasons. With a tight economy, the number of people needing a little bit of money to get by until the next payday has also risen. With a cash advance loan, an individual is provided with money upfront with a paycheck being used as collateral and then come payday, the loan is repaid. People use this type of loan for all types of purposes, one being paying on credit cards.

Today, millions of people are overextended on credit cards as they try to get by until they get back on their feet from being hit from an economic downturn. With credit cards being overloaded, people feel stressed but creditors still want to get paid. Sometimes, a credit card will become due days or weeks before a person is paid, which means a person has the option of being late on the payment, which damages credit, or taking out a cash advance loan.

In this situation, let us say that a person is paid on the 15th of each month but has a number of credit cards due on the 5th. Working hard to keep balances down and bills paid on time, the person could take out the required amount of money needed to make the payments on the credit cards and then when payday rolls around during the middle of the month, pay the cash advance loan off entirely. Typically, loans of this type are very inexpensive so for the small amount charged, it is worth maintaining a good credit rating by paying the credit cards on time.

Another option would be for a person to take out a cash advance loan spread out for a longer amount of time. In this case, entire balances of credit cards could be paid off and the loan paid off in installments. This would be beneficial in a situation where a person has several low balance credit cards but with outrageous interest rates. Instead of paying 25% interest on several credit cards with balances of $500 each, a person could take out enough money through a cash advance or payday loan to pay off the entire balances. Since loans of this type have low interest rates, the person saves a significant amount of money.

While a number of benefits are associated with these loans, other dynamics need to be understood. For instance, people need to remember that cash advances are much different from other types of loans. A prime example is that cash advance loans are designed specifically to help people out on short-term basis whereas other loans are geared more toward long-term solutions. Therefore, anyone going this route needs to understand all the details before signing on the dotted line.

Additionally, a cash advance loan can be more expensive over other loans. Again, most of these loans have a lower interest rate over credit cards. Therefore, in the above-mentioned scenarios, there is a benefit. However, some loans of this type will start accruing interest from day one, which could add up quickly. Even if the loan were paid off prior to maturity date, it could still be an expensive option.

When a person begins looking at various options for using a cash advance loan to pay down or pay off credit cards, they need to realize that while the interest rate is generally low, the lending company might have high administration and processing fees. Again, anyone that wants to use a cash advance or payday loan needs to read all the fine print, asking questions about the terms and conditions if not understood.

Another important factor associated with using a cash advance loan specific for credit cards is that most will have a cap on the amount of money lent. Typically, the person is allowed to borrow a certain dollar amount, which would be based on several criteria including income, time on the job, credit score, and so on. However, many cash advance and payday loans being offered today are by companies not asking for any type of credit information, which makes securing a loan such as this much easier.

In fact, getting a loan like this for taking care of credit cards can be done through the conventional brick and mortar lender or through reputable online lenders. The bottom line is that there are numerous situations when cash advance or payday loan makes perfect sense but there are also times when they should be avoided. In the case of wanting to get out from under credit cards, this option is one that people might consider.

The most important step is finding a professional and highly regarded company, one that will work with the applicant, providing guidance about the process and answering any questions. Obviously, this type of deal needs to be good for both parties!