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Margaret Wack

Margaret Wack is a poet, writer, and editor. By day she works to create engaging and informative content for small businesses and big organizations alike. Writes about personal finance, health and wellness, and arts and culture, among other topics.

A cash advance is a type of short-term loan that allows borrowers to access cash quickly in the form of a credit card cash advance, merchant cash advance, or payday loan. Borrowers are expected to pay the loan back in a short period of time, usually within a few weeks. While cash advances can be a good option if you need cash in a pinch, they often come with very high rates and fees, and should only be used as a last resort in the case of an emergency.

How a Cash Advance Works

If you need cash fast, a cash advance is a quick and easy way to get cash in hand. However, borrowers should be aware that there are often steep costs associated with cash advances. Cash advance fees, bank fees, and interest can all make cash advances one of the most expensive forms of borrowing out there. In most cases, cash advances take the form of an expensive short-term loan, which the borrower will have to pay back within a few weeks.

Laws and Regulations Concerning Cash Advances

Different states have different rules and regulations when it comes to cash advances and payday loans. While these laws are usually put in place in order to protect consumers from predatory lenders, in many cases regulations are lax when it comes to high interest rates and fees. Laws concerning cash advances may limit the maximum loan amount, maximum loan term length, finance charges, and interest rates. In some states, such as Arizona, Arkansas, Georgia, New Mexico, and North Carolina, payday loans are prohibited entirely.

Why Cash Advances are Expensive

There are a variety of costs and fees associated with cash advances, making them one of the most expensive forms of borrowing. In many cases, borrowers end up paying a significant chunk of money in fees, interest, and other costs on top of paying back the money they borrowed. Because of this, cash advances should be viewed as a last resort and only used during financial emergencies. Costs associated with cash advances include:

  • Fees – Depending on the type of cash advance, you may have to pay a variety of fees when you borrow the money. Credit cards often charge a flat fee per cash advance, or charge a percentage-based fee depending on how much you borrow. Payday loans also usually come with hefty fees.
  • Interest – No matter what kind of cash advance you take out, you’ll likely be stuck with extremely high interest rates on the money you borrow. Interest can add up fast, even if you only borrow the money for a few weeks.
  • Bank and ATM fees – If you take cash out of an ATM or bank using a credit card cash advance fee, you’ll likely have to pay bank and ATM fees. While these are usually only a few dollars per transaction, it can represent an unwelcome additional cost if you’re already strapped for cash.

Types of Cash Advances

When people talk about cash advances, there are several slightly different financial products they may be referring to. These include payday loans, cash advances, and merchant cash advances.

Payday Loans

Payday loans offer short-term relief for borrowers who need cash during financial emergencies. However, this form of borrowing can also be dangerous, trapping consumers in a cycle of debt that they may find it difficult to escape from. In most cases, payday loans have a term length of around two weeks, and borrowers are expected to pay back the loan by their next payday in order to avoid additional fees.

Credit Card Cash Advances

Similar to payday loans, cash advances let borrowers withdraw cash from their credit line. If you need cash fast and already have a credit card, a credit card cash advance could be a good option. In most cases, borrowers are only able to borrow a small amount of cash through this method, even if their credit limit is much higher. Like payday loans, these types of cash advances come with high fees and interest rates, and should only be used as a last resort.

Merchant Cash Advances

Merchant cash advances are similar to payday loans and credit card cash advances, but with one important difference: they’re usually only available to small business owners. In essence, merchant cash advances allow business owners to borrow cash upfront by promising a lender a portion of their future sales.

Cash Advance Online Requirements

If you decide to apply for a cash advance online, there are a few requirements to keep in mind as you apply. When applying for a cash advance, you’ll also have to provide some personal information about yourself, including:

  • Age – In most cases, you’ll need to be at least 18 years old in order to apply for a cash advance.
  • Citizenship – Citizenship requirements vary, but in most cases you’ll only be able to apply for cash advances with lenders that are legally allowed to operate in your state of residence.
  • Income – Cash advances usually require proof of some form of steady income.
  • Personal details – You may be asked to provide other personal details, including your name, address, and banking information.

Where Can I Get a Cash Advance?

Cash advances are available from a variety of different banks and alternative lenders. These include:

Online Loans

Online loans allow borrowers to submit an application for a cash advance through an online lender. The application process is usually simple, and borrowers may be approved within a few days or even hours. Be sure to do your research and look for reputable lenders, and shop around in order to qualify for the best rates.

Credit Unions Loans

Some credit unions offer payday alternative loans, which are a good option if you need cash fast. These loans are often more consumer-friendly than expensive payday loans, although borrowers may have to join a credit union in order to qualify.

Peer to Peer Lending

Peer to peer lending is a form of lending that allows borrowers to secure funding from a group of individuals rather than from a bank or other financial institution. Peer to peer lending can have lower interest rates and be more accessible than other forms of borrowing.

Borrow from Family or Friends

Before you turn to expensive options like payday loans or cash advances, you should make sure to explore your other options. While it might be uncomfortable to ask family members or friends for cash, it may save you a significant amount of money in the long run. Most people have experienced a financial emergency at some point in their lives – it’s nothing to be ashamed of.

How to Get a Cash Advance

If you plan on applying for a cash advance, there are a few steps to the process. To apply for a cash advance, you should:

  • Fill out the loan application form – Whether you apply online or in person, you’ll need to fill out an application with each lender. Make sure to have important personal information handy, including your banking info.
  • Receive and compare offers – Whenever you’re applying for a financial product, you should always compare different offers in order to make sure you’re getting the best deal possible. Try to choose a lender with the lowest rates and fees.
  • Sign the agreement – Once you decide on a lender, you’ll have to sign the agreement before you can access the cash.
  • Receive the money – Cash advances are known for their quick turn-around times, and you’ll likely receive your money soon after you sign the agreement.

Cash Advances Online – Pros and Cons

For many borrowers, cash advances represent one of the only ways to access cash fast in the midst of a financial emergency. Cash advances are usually easy to apply for, and borrowers can receive funds within a few days or even a few hours. Since cash advances don’t require any collateral, they may be a better option than types of loans that require collateral, such as title loans.

While cash advances do have some advantages, in general they should only be viewed as a last resort once you’ve exhausted all other options. This is because cash advances are extremely expensive, with high interest rates and fees that can make it hard to pay off the loan if you’re already struggling financially. In a worst-case scenario, cash advances and payday loans can trap you in a cycle of debt that is extremely difficult to escape from and that will only make your financial situation worse.

If you do decide to pursue a cash advance, you should be sure to pay off the loan as soon as possible in order to avoid additional interest and fees. While some financial emergencies are unavoidable, you should try to take steps to avoid relying on cash advances in the future, including building up a financial safety net, limiting excessive spending, and borrowing responsibly.