July 5, 2016
There are many different types of cash advances. The common feature among all of them is that most borrowers would have to pay more fees or interest charges for a cash advance than other forms of cash such as a paycheck or a low-interest rate loan.
It’s hard to determine which cash advance is the cheapest as there are various types to suit the borrower’s current financial situation. Let’s look at some types of cash advances and their characteristics.
This is probably the most popular type of cash advance .Cash can be withdrawn from an ATM or, depending on the credit card company, on a check deposited into your account or encashed at a bank. Cash advances on a credit card usually come with much higher interest rates than credit purchases and have a fee for cashing out your credit. Credit card companies either charge a flat rate cash advance fee or charge a percentage of the amount withdrawn. Furthermore, if the borrower uses an ATM to access the cash, he’ll be charged a small ATM usage fee. The credit card cash advance amount depends on the borrower’s credit score, his business. and its credit card sales. Usually, credit card cash advances should be used as a last resort. Despite that, many businesses with bad credit still use credit card cash advances to finance their businesses in times of need.
Another common type of cash advance is a payday loan. As with a credit card advance, payday loans also have high-interest rates and fees. Payday lending institution issue loans anywhere from $50 to $1,000 but with whopping interest rates of more than 100%. Payday loans are short term and are to be paid back on the borrower’s payday. If he wishes to extend the loan, this will lead to additional interest. To get a payday loan, the borrower will write a post-dated check made out to the payday lender for the amount of money he wants to borrow, including the fees. The lender in turn immediately issues the amount but waits to cash the check until the borrower’s next payday. Since having bad credit is not really a problem for getting payday loans, people with bad credit or no credit are most likely to use this type of cash advance as it may be their only option for a loan since banks require a minimum credit score.
A merchant cash advance is a lump sum of capital that isn’t really a loan but is a purchase of a fixed dollar amount of a business’s future credit and debit card receivables. The advance provider buys a specified dollar amount of the business’ future debit and credit card sales at a lower price instead of having the borrower repay one fixed monthly payment. The business then remits a fixed percentage of its daily credit and debit card revenue automatically to the lender until the whole merchant cash advance is repaid in full. There are some advantages in merchant cash advances such as not requiring a stellar credit history to be approved for one or the fact that the remittances are automatic and don’t require the borrower to write any checks. Compared to a traditional business bank loan, getting a merchant cash advance is easier and faster.
Another type of cash advance is for the borrower to go directly to his employer. The availability of the service, as well as the applicable fees and interest will vary according to employers though usually no fees or interest are charged. This easily makes it the cheapest type of cash advance. However, the uncertainty of getting one from the employer is something that cannot be overlooked.
A refund anticipation loans (RAL) charges high fees and interest rates and are disbursed based on the amount of money a person will get back in income taxes. There are sometimes legitimate needs for income tax return money sooner. In that case, the individual may consider asking for a refund anticipation loan if they need to access this money right away.
Before borrowing money from any cash advance program, it is best for the borrower to do thorough research to find the best option for his financial needs.
February 24, 2017