What Are Cash Advances?

There is some confusion about cash advances in terms of what they are and how they can be used. In this article we will go over exactly what they are, the best ways in which to use them and the main misconceptions that are held about them.

Cash Advances: Definition

What are cash advances? Well, if you know what payday loans are then they are basically the same thing. They are short term loans which you have to pay back when you are next paid from your job. It is as simple as that in essence. There are a couple of conditions that you have to meet in order to qualify for a loan of this sort though.

The main condition that is imposed on your being able to get a cash advance is that you are paid monthly from a permanent job. It’s necessary that you are paid every month because these are loans which have been designed to last that length of time. The other main condition hardly needs to be stated, which is that you need to be able to afford the loan from that single pay cheque the following month.

It could be that you have some other source of income that month, for example if you have a birthday that month and you are expecting money from that. Or you have some inheritance money which is due, or something like that. It’s important to remember that the lender is not going to take that sort of thing in to account, only what you are going to be able to afford from your pay cheque.

There is nothing to stop you from considering those other sources of income as well when you are thinking about how you will afford the loan though of course. You also have to take in to account all of the other expenses you’re going to have next month, which is something that the provider of a cash advance is not going to do.

Best Uses for a Cash Advance

When it comes to the sorts of things that you can use cash advances for, the possibilities are virtually limitless. That is, after you have taken in to account the amount of money you’ll be able to get considering you have to pay it all back with one pay cheque. The lender is not going to impose any restrictions on the use of the money. Although having said that, generally they are only useful in emergency situations.

And the reason that these kinds of loans are only useful in emergencies is due to the fact that you have to repay them so soon. Since that is the case, if you require money for anything other than an emergency in which you have to get some money fast, you might as well wait until you’re next paid to be able to get it. That’s why it’s so important that these loans allow you to get money so quickly.

That loans of this kind are used in emergencies is demonstrated by the fact that the top use for a cash advance is so that an overdue utility bill can be paid. This is clearly an emergency since if the payment is not made then an essential service can be lost. As long as you need the money urgently for something important (defined by you) then this kind of loan can be useful for anything though.

Misconceptions about Interest Rates

One of the main misconceptions that arise about a cash advance is that their interest rates are extremely high. This just comes about from people giving too much attention to the APR, which tells you how much interest you would have to pay in a year on a month-long loan. So that is nowhere near how much you have to pay in interest.

Additional information about cash advances by author Cameron Davies are at Cash advances.