Before you borrow: 4 things to know about payday cash advances
When an unforeseen expense arises, resorting to a cash advance can help you put out a financial fire.
Everyone has been there at least once. Despite your best efforts to stay on a budget, something expensive that you didn’t expect blew your plans. Maybe your roof is starting to leak and you need to call for repairs, or your cat is eating something it shouldn’t and spending a night in an after-hours vet clinic.
Of course, these emergencies happen when you’ve already used your credit card to the max, have no savings, and payday is boring in a week or two.
A cash advance for a payday loan can be used as a stopgap until you get paid. But before you apply, there are some things you should know about this borrowing option.
1. It’s an expensive way to borrow
Payday loans are generally an option for people who have bad credit. While other lenders may deny you funds due to your low score, direct payday lenders can still approve you as long as you meet other financial requirements.
But there is a catch. Due to your bad credit, they will charge high interest charges on your loan, which can be an expensive way to borrow. Some states place limits on these rates, but those that don’t may allow lenders to charge triple-digit interest.
2. They have very short terms
A payday cash advance gains the name because it is usually due on or before your next payday. On average, borrowers have two weeks to pay the principal, plus fees and interest. These short terms attack high rates.
3. They are not your only option
When you’re in a bad time, an expensive loan Where a short term loan might make sense. But face costly fees and the short term can be difficult for most people who live paycheck to paycheck.
Fortunately, you can find an alternative to payday loans with bad credit by going online. The fact is, cash advances include many options, including installment loans, lines of credit, and an advance on an existing credit card.
Most of these cash advances can also have high rates when borrowing with bad credit, but they can offer more manageable terms to help you manage your repayments. Online loans with monthly payments give you more time to find money than payday cash advances.
4. They are best for unforeseen emergency expenses
Typically, payday cash advances are only ideal when you need help making an urgent financial move in an emergency. Like the examples at the top of this article, you might need help with unscheduled repairs or paying for emergency vet and medical bills.
This is as far as these advances go. If you need help with a large, planned purchase, such as a car or a house, other financial products are available.
Despite this guideline, nearly 70 percent of payday borrowers use them for regular expenses, like rent or utilities. If you can’t pay recurring bills without borrowing, contact a free credit counseling program to see how you can get back on your feet.
Borrowing is never a simple decision, but it gets easier when you have all the facts. Taking the time to become a smart borrower – like reading this article to the end – can help you find the best solution for your next financial emergency.