Cash Advance Facts That You Must Know!

A cash advance is a short-term loan offered by a bank or an NBFs lender. The cash advance loan also refers to the service provided through credit card where the issuing authority allows the cardholders to withdraw a certain cash amount as per your approved eligibility. Cash advances generally come with steep interest rates and fees, but yes, they are attractive among borrowers as you get the fast approval and availability of the cash quickly. Cash advance or instant loans are very convenient to manage any emergency.

Advantages of Cash Advance Loans

We all need some additional cash to cover an unexpected expense or a shortfall toward the month's end. Cash Advance Loans are the quickest way to get money to cover those surprise expenses.

But having said this, Cash Advances come with some cons or negatives too:

ü  Processing Fee - In cash advance loans, the processing fee is either flat or fixed amount or a certain percentage, i.e. 1% to 5 % of the loan amount. Lenders pick the higher one.

ü  Higher Interest Rate - Cash Advances come with the highest rate of interest ranging from 22% to 30% as compared to any other loan.

ü  Immediate Interest Accrues - The interest rate in case of cash advances is charged aggressively for example, in credit card, you'll be charged from the day you take the amount, but in case of cash advance loans, you have to pay the interest amount for the whole period even if you pay back the loan amount.

This way Cash Advances are very aggressive and expensive, which also includes certain taxes, this makes hard for the people to pay back who take Cash advance loans.

How Cash Advances Can Harm Your Credit Score?

Taking cash advance loan will not impact the same, but it will start hurting when you begin utilizing the money. In any case, taking a cash advance can place you in a difficult situation that would bring down your Credit Score rating.

The cash advance loan is added to your balance parity, which changes the pattern of your credit use. Credit Utilization is a score that takes a gander at the amount of your all credit which you're utilizing. Ideally, it is recommended to keep this number under 30%. Interest also starts accruing from cash advance, which makes it further difficult for the person to clear all debts. And if you miss any of the loan repayments, this will more worsen the situation for you.

How Cash Advance Loan Is Different From Payday Loan?

If we talk about the form their basic structure and practicality, both are more or less similar. In both cases, the borrower gets the loan amount immediately and for a shorter period with hefty processing fees and higher interest rates.

The main difference in Payday Loans as compared to Cash advance is that they are, decided based on your pay cheque rather your credit history. The payment of Payday loan is done immediately on the very next day of your salary credit through post dated cheque which you give to your lender at the time of loan approval and disbursal.

No matter which loan you take, but if manage it smartly and responsibly, it will help you to manage any financial stress is an easier way.