Cash Advance Loans

Cash in advance loans are available from several different sources.

Cash Advance Loans from Paychecks

Many companies will provide short-term loans to help people pay bills in between paychecks. The interest on the loan can be based on several factors, including the number of days the loan is outstanding. A company might charge 2% interest per day for a new customer. This 2% is equivalent to 730% APR. Or, a company might charge a flat fee, such as $20 per every $100 loaned.

Companies Offering Cash Advance Loans

Companies may offer cash advance loans without the need of having credit checks and regardless of credit ratings. They usually do not require collateral. Cash advance loans might be based on a person's monthly net income, how long the person has been employed, and if the person has any other outstanding short-term loans.

Cash Advance Loans from Credit Cards

Many credit card companies offer cash advance programs. Consumers are sometimes charged more than their regular interest rates when using credit cards to get cash in advance. In addition, many companies do not offer a grace period on cash advance loans. Companies start to charge interest immediately.

Cash Advances from Lawsuits

Although technically not a loan, a person can receive cash advances against the future value of accident or personal injury lawsuits. The company is paid back when the lawsuit is settled. If the lawsuit is lost, the company looses the cash advance. The person does not have to pay the company back. Since the company is taking a risk on the disposition of a lawsuit, the company might charge an application fee plus up to 4% of the settlement.

Cash Advance Loans: The Bottom Line

Consumers need to shop carefully and compare rates and services before committing to a short-term loan. In some cases, a late charge might be less costly than the fees that would need to be paid when using a cash advance loan. A consumer might also want to check with his or her creditors about a debt repayment plan. Consumers should definitely take another look at budgeting if they are considering a cash advance loan.

The bottom line on cash advance loans is that they are very costly and should only be used as a last resort. In some cases, they can become a “never ending circle” strain on a person's already limited budget.

By Laura Evans