Ever wondered what the difference is between a cash advance and payday loans? This article will help clear things up.
We all need a helping hand from time to time, especially when money is involved. You may think that you have things under control. But one unforeseen development could turn a stable situation into a financial nightmare. Thankfully, you can often solve these issues with short-term borrowing, such as a cash advance and payday loans. As with any major financial decision, it’s imperative that you enter this arena with the information needed to make the best decision. Otherwise, you could be opening yourself to an even worse situation further down the line.
- Cash advances allow you to directly withdraw funds via a credit card
- Payday loan funds can be made available within a very short timeframe
With regards to short-term lending, cash advances and payday loans are two of the most commonly used options. Not only do they offer borrowers a chance to access their funds quickly, but they are less strict over lending requirements.
So even if you’re credit history has stopped you from accessing other forms of lending, these two options are probably open. Given that people with less than perfect credit scores are often the ones who most need it, those short-term loans can be a godsend.
A payday loan
In its most basic sense, a payday loan is essentially an advance on your upcoming wages. So if you’ve suffered a blown car tyre, for example, and need to access your wages before pay day, this can be the perfect option.
This type of loan is designed so that you pay it back within a matter of days and no longer than a few weeks. If you aren’t able to meet those demands, the high-interest rates could cost you dearly. However, as long as you can stick to the intended agreement, it can be a fantastic way to access money fast before clearing the debt quickly too.
A Cash Advance
The cash advance is slightly different but is another short-term loan option. Credit card issuers commonly handle these. They can allow the borrower to directly withdraw funds via the credit card. It offers fast access, but should not be confused https://paydayloansohio.net/cities/gambier/ with standard credit card lending.
Cash advances can also take other forms including merchant cash advances. This can open up your options considerably, especially if you need the funds for business purposes.
One of the main differences between a cash advance and payday loans is the way that the available funds are calculated. As such, this has a huge influence on the level of funds available too.
Payday loan companies usually work with standard borrowing amounts. The minimum amount borrowed can often be as little as ?50 while the maximum is often set to ?1,000. There are circumstances where those parameters can be increased, like when a customer has built a history with the lender. Generally speaking, though, the ?50-?1,000 model is a relatively accurate barometer.
Conversely, the cash advance system can be a little more flexible. Many credit card issuers will determine an individual’s amount against their current credit limits. As such, the specific figure can fluctuate from person to person. Again, though, a history with the lender will likely result in greater opportunities. In reality, though, the upper limit is likely to be hundreds. The minimum, however, can be as little as the lowest denomination available at the given ATM.
Merchant cash advances often work on figures based on monthly sales revenue. They can be arranged through other methods, and have unique repayment models too. This post, however, is focused primarily on the consumer situation.