How a payday Loan and Credit Card Cash advance Work?
Are you stuck for money? Having financial difficulties? A financial issue come at the wrong time for you and your family? Both a payday loan and a credit card cash advance are types of credit that may help you in need of fast cash. There are no restrictions to how you use the funds, this makes them suitable for a sudden car repair, new boiler, groceries or even a family break.
Payday loans– A payday loan will involve you applying through a lender for a specific loan amount. If your application is approved, you’ll generally receive the money within 24 hours. You can then make repayments according to the plan, this will be outlined in your contract.
Cash advances- A cash advance is where you withdraw cash from a current credit card you have or to transfer money from your credit card to a different account. As this is not a purchase, you will be charged a higher rate than normal. It becomes part of your outstanding balance, of which you must make a minimum monthly payment, this is in order to keep the credit account in good standing.
Which is more expensive?
Both a credit card cash advance, and a payday loan can become a costly way of getting cash quick. Keep in mind the cash advance rate is an annual rate whereas the payday loan is not. If you pay the cash advance back quickly it can become cheaper for you, but if you only are only going to make the minimum required repayment, a payday loan may be the better option for you.
Weighing up your options
The pros and cons of applying for a payday loan:
- Availability
Most payday loans require a certain number of criteria needed in order to be approved. This includes income, age and residency requirements. - Fast turnaround
You will usually receive a decision instantly or within 5 minutes, and the money into your bank within a day or two. - Short-terms
These loans require you to pay them back quickly, leaving you with no added debts to have to worry about. - Fees
The rate of a payday loan is higher than a personal loan would be. Plus, the fees can mount up, especially if you are late with a repayment. - Overall cost
In general, the overall amount of money you will spend for this service makes it a non cost-effective way to handle your finances.
The pros and cons of withdrawing cash with your credit card:
- Accessibility
There are no additional applications needed for a credit card cash advance. You will only need to find an cash machine and withdraw the amount you require. - Flexible repayments
So long as you don’t mind accruing the interest, you can pay off a credit card cash advance at your own convenience. - Interest rates
The interest rate charged for a credit card cash advance is considerably higher than what you would pay for a standard personal loan.
Mark Feary