Should You Take a Cash Advance?


Most of us are familiar with the workings of an ATM - automatic teller machine. We can make deposits, check balances, and access the cash in our checking, savings and credit accounts. In fact, one of the most common uses of an ATM is for a cash advance. The question is ?should we be using cash advances??

Generally, the answer is yes, but only if we understand their implications. While many people make a habit of taking cash against their credit accounts, a majority of them cannot repay that sum within the next business cycle. This means they are hit with a staggering interest rate, usually more than 20%. While they may absolutely need the cash advance, they may not be well aware of the actual total cost for that small loan.

Is there an option? Actually, anyone with a regular paycheck can utilize a payday loan or cash advance instead. These can provide someone with the funds they need, but also with a defined repayment period which can prevent excessive interest fees from accumulating.

How does it work? There are many ways a person can take such a loan, but realistically it should always begin with their budget. Most people run into financial trouble simply because they do not create and follow even a basic budget. Sure, they know when their rent or mortgage is due and how much that costs, but some people don?t realize that they are dropping hundreds of dollars each year on dining out, movies, recreation and entertainment, clothing, gas and trips to the local mini-mart. A budget quickly shows people any areas of weakness or trouble.

A budget is also a good way to identify the times when a shortfall of cash is going to occur and alerts the individual to their need for a cash advance or payday loan. For example, if someone actually takes the time to fill in a calendar with the bills and payments they will be making, it will be easy to see if they will end up without money at some point in the coming weeks.

At this point they can go online and contact a payday loan or cash advance agency to make arrangements to borrow the funds they will need. There are some excellent advantages to making this choice, and among them are convenience, speed and savings.

First, the convenience of this choice is due to the fact that it does not require a credit check. Even people with no credit or poor credit will be able to access a payday loan or advance. Additionally, most advances can be funded within a single business day, and the money is automatically deposited into the borrower?s account.

The savings comes from the repayment plan, which is a number of flexible plans and options that see the cash advance returned in a matter of weeks. This is superior to the ?loan? made by a credit card company which actually encourages the borrower to forgo repayment in exchange for mercenary interest fees.

Does a cash advance always have to be for paying bills or meeting expenses? Absolutely not! Many people actually take an advance or payday loan when they are about to go on a trip or on a vacation. This is to allow them to have cash on hand for special purchases, extra souvenirs, snacks or meals without worrying about finding an ATM or paying all of the associated fees.

Interestingly, many people will also take a cash advance in order to make a special purchase. For example, many people use the funds as a way of putting a down payment on a car. They simply budget out the amount that they have borrowed into the weeks following the purchase. This allows for negotiation to occur because most auto dealerships tend to be flexible with buyers who will present them with some cash at the closing on the loan.

Clearly, a cash advance can help someone through an emergency, to make special purchases, and to enjoy a vacation, but the important thing to remember is how much the advance will cost in the long term. Comparing a credit card advance to a payday loan or advance tends to demonstrate that consumers who opt to ?lock in? to a repayment plan end up eliminating their debt in a shorter amount of time and with the lowest overall or total costs accumulated.

What if a consumer needs a bit more than is available through a cash advance? Currently, if a consumer is in need of more than $2,000 they will have to find options for a secured loan. These are usually only available through a bank or traditional lending agent, but there are also options for car title loans. These are a cash advance option available to anyone with a vehicle that is less than ten years in age and which serves as collateral against a larger loan. This offers someone without perfect credit the means of accessing funds and eliminating debt.