When Does a Payday Cash Advance Make Sense?
A cash advance payday loan may be a convenient way to get money in an emergency, but it can be costly.
Before you commit to borrowing, you should weigh up the pros and cons.
Have you ever experienced a month from financial hell — the kind where everything goes wrong?
Your dog gets into chocolate, your daughter breaks her foot, you’ve managed to chip a molar, and your car breaks down on the highway.
To add insult to injury, these unexpected expenses slam into your life when your credit cards have reached their limits, your savings have gone “poof,” and your credit score has reached rock-bottom.
With payday still an entire week away, borrowing a cash advance seems like your best bet.
Cash advance payday loans are a convenient, simple option when you need cash to cover urgent, unexpected expenses, especially when you go online to get them.
But they’ve built up a bit of reputation over the years, suggesting they might not be the right solution for everyone.
What is a Cash Advance?
An advance is an umbrella term for any kind of short-term loan that grants you a small sum of money to help cover unexpected emergency expenses.
Payday loans, installment loans, credit card cash advances, and lines of credit all fit under this umbrella.
Out of this list, payday loans have the shortest turnaround. In most cases, the average borrower has just two weeks to repay everything in one lump sum.
This includes the principal (or the amount you borrowed) plus interest, finance charges, and other fees.
Payday Loans Known for High Rates
Payday loans tend to be marketed for people with bad credit, which means they often come with higher fees.
It’s not unusual for these financial products to apply a three-digit APR.
Standing for Annual Percentage Rate, APR is the total borrowing costs — from interest and finances charges to any additional fees applied by the lender.
These fees can vary greatly from lender to lender.
However, for the average payday loan, they equal to you paying an extra $10–30 on top of every $100 you borrow.
Borrowing a payday cash advance only makes sense when you can afford their cost on such a tight timeline.
This isn’t always easy for people who rely on online payday cash advances. If your finances are stretched to their snapping point, two weeks may not give you enough time to pay off what you owe.
What Are the Alternatives?
Like any borrowing option, payday cash advances only make sense when you can handle their high fees and short terms.
If you think this arrangement would be too hard to handle with your current finances, there are other options available.
Ask Friends or Family
Your loved ones might be willing to help by giving you a personal loan. Although this may come with less red tape than official borrowing options, you should take it just as seriously.
Some experts even recommend drawing up a short contract to demonstrate your commitment to repaying your debts.
It’s also a good way to outline everyone’s expectations from the start.
It’s easy to think you’re on your own when facing a financial emergency, but there may be people willing to help.
Reach out to the person or business that you owe.
Once they understand your situation — and that you want to pay them back — they might be willing to arrange a payment plan that works with what you have.
Online installment loans are designed to help with unexpected expenses like doctor’s fees and auto repairs.
They typically offer a higher loan amount than most payday loans, and they have longer terms.
Aren’t sure how an online loan is different from the one you’d borrow in person?
Take a look online to find out answer questions like what is an online loan and what do I need to borrow.
Rather than paying back everything you owe in one lump sum, you’ll make multiple payments (or installments) staggered over weeks or even months.
These fixed payments fall on fixed days, letting you build your budget around due dates.
Lines of Credit
A line of credit means you aren’t given funds upfront like you would a cash loan. Instead, you’re given a credit limit, which you may withdraw from as you need.
You’ll only start to accrue interest and fees on the amount you use.
The way you pay off a line of credit is different, too. Every month, you’ll receive a statement balance outlining your purchases, interest, finance charges, and outstanding balance.
You have the option to pay it in full or make what’s called the minimum payment.
The minimum payment is a fraction of your balance and keeps your account in good standing.
This minimum can be helpful when you’ve hit a rough patch, but you should always aim to pay as much of your balance as possible.
This helps free up your available limit for the next emergency.
How Do You Solve an Unexpected Financial Emergency?
This is a personal question, so it deserves a personal answer. How you handle vet fees or auto repairs depends on your financial situation.
When it comes to payday cash advances, it depends on whether you can handle high fees and a short turnaround.
Don’t panic if you can’t.
As you learned here today, there are other options available.
Explore these different ways of handle an urgent expense, and remember: only borrow an online cash loan when you can afford its rates and terms.
Is a payday cash advance for you?
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I am a girl from the UK with a lot of thoughts. Not a fan of the online world but, every once in awhile I let my thoughts out. I write about life, finances, home design, and more. Hoping to inspire people every day. I’m a writer, a reader, and an old soul.