Before You Borrow: 4 Things to Know About Payday Cash Advances

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When an unexpected expense comes your way, turning to a cash advance can help you put out a financial fire. 

Everyone’s been there at least once. Despite your best efforts to follow a budget, something expensive you didn’t expect blows up your plans. Maybe your roof starts leaking and you need to call out for repairs, or your cat eats something she shouldn’t and spends a night at an after-hours vet clinic.

Of course, these emergencies happen when you’ve already maxed your credit card, you have no savings, and payday is annoyingly a week or two away. 

A payday loan cash advance can act as a stopgap until you get paid. But before you apply, there are some things you should know about this borrowing option.

1. They’re an Expensive Way to Borrow

Payday loans are usually an option for people who have bad credit. While other lenders may deny you funds because of your low score, payday direct lenders may still approve you provided you meet other financial requirements. 

But there’s a catch. Because of your bad credit, they’ll apply high-interest fees on your loan, so it can be an expensive way to borrow. Some states impose limits on these rates, but those that don’t may allow lenders to apply triple-digit interest.

2. They Have Very Short Terms

A payday cash advance earns the name because it’s usually due back by your next payday. On average, borrowers have two weeks to come up with the principal, plus fees and interest. These short terms dogpile on expensive rates.

3. They Aren’t Your Only Option

When you’re in a bad spot, an expensive loan or a short-term loan might make sense. But dealing with both costly fees and short terms can be challenging for most people living paycheck to paycheck.

Fortunately, you can find an alternative to payday loans with bad credit by going online. The fact is, cash advance loans consist of many options, including installment loans, lines of credit loans, and an advance from an existing credit card. 

Most of these cash advances may also have high rates when you borrow with bad credit, but they may offer more manageable terms to help you handle your repayments. Online loans with monthly payments give you more time to come up with the money than payday cash advances. 

4. They’re Best for Unexpected Emergency Expenses

As a rule, payday cash advances are only ideal when you need help making an urgent financial move in an emergency. Like the examples at top of this article, you might need help making unexpected repairs or paying for emergency vet and medical expenses. 

That’s as far as these advances go. If you need help making a big, planned purchase like a car or home, other financial products 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, reach out to a free credit counselling program to see how you can get back on your feet. 

Bottom Line

Borrowing is never a simple decision, but it does get easier when you have all the facts. Taking some time to become an informed borrower — like reading this article to the end — can help you find the best solution to your next financial emergency.

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