What Are Cash Advance Loans and What Are They Used For?
A cash advance is essentially a short-term loan. It is often used by individuals who need money quickly. Most cash advances have a high interest rate and it is beneficial to the person that takes out the loan to pay it back as quickly as possible.
The most common type of cash advance loans in the United Statesis a one on a credit card. Most major credit card companies will allow a card user to take out a cash advance up to a certain percentage of their total credit line. The interest on the advance is usually a much higher percentage than the usual rate for purchases on the card and usually payments made to the card will pay off the cash advance before any balance from purchases.
Most credit card companies will also charge a fee on top of the interest at the time of the advance. For example, if you request a $1,000 advance, you may see a charge on your next credit card bill for $1,020, which will includes the money you were given plus the additional fee you will need to pay. This ensures that the lender will make money on the cash advance even if the person requesting the loan pays it back quickly to avoid additional interest.
In addition to credit card companies, there are a number of other companies whose sole purpose is to offer short term cash advances people in need. The key difference with these companies compared to the credit card companies is that the loan has a set amount of time in which it must be paid off and cannot continue indefinitely without the loan applicant getting hit with additional fees.
People most often take out cash advances when they are hit with unexpected expenses. Their car broke down. They fell sick and have a large doctor’s bill that their insurance will not pay. It can also be used to pay off another bill that is due to avoid a large late fee that might cost the person more money than paying the interest on the cash advance. During an emergency like this, a cash advance may be the only option available to someone.