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Cash advance was created to enable people to request and have easy access to funds when they need them. Sometimes the monthly budget that is projected for expenses can exceed its limits.
This is when you can take a cash advance to meet your needs. In other references, a cash advance is a loan that is given to someone by a bank or other financial service providers. It’s a short-term intervention for those who need funds for their expenses.
Sometimes cash advance is interchangeably used with payday loans. They both serve the same purpose: providing you with money to use in the short-term until the next time you receive income.
They both also fall under the unsecured type of loans. This means that to receive a cash advance loan, you do not present any collateral or security in order to receive the loan.
It’s different from the secured type of loans such as mortgages or auto loans where collateral is presented before you get the money needed.
A Short Term loan is a broad term used to refer to loans or financial interventions that do have a long repayment period. Usually, it spans less than a year. Cash advance is a type of short-term loan. It functions as a subset of short-term loans.
Other types of short-term loans include payday loans. Payday loans are very popular in the sense that it gives you money to solve emergencies. You then pay back at the next time you are paid.
A lot of people find it convenient to use short-term loans. This is due to the fact that it does not require a lot to be approved for the loan. Your loan application can go through in less than a day.
How Cash Advance Works
Cash advances have a duration of at most two weeks for you to pay back. The amount to be borrowed ranges from $50 – $1500. This normally depends on the state or country you’re living in and the lenders’ terms and conditions.
For instance, John, a single father, is faced with the challenge of his car breaking down on one of his errands. He then realizes that he does not have enough funds to cover his car repairs.
Also, he is in need of transport to go to work himself and pick up his children from school. While at the mechanic shop fixing his car, he gets into a conversation and he is told about cash advance loans to help him solve his situation.
John then decides to apply for a cash advance immediately. Upon receiving it, he is able to pay for his car repairs. When he got his paycheck, he paid back the amount he borrowed. This is how the cash advance works.
Those who want to access cash advance normally pay a one-time service fee. The amount to be borrowed depends on the country that you are in and the laws that govern finances. The period for repayment is within two to four weeks.
Do You Need To Have A Bank Account Before You Get A Cash Advance?
Having a bank account or not having a bank account, before you can access cash advance depends on the type of cash advance you are looking for.
You may need a bank account in order to have a cash advance because the lenders normally transfer the funds through that medium. In the case where you’re using a credit card to get a cash advance, you do not necessarily need a bank account at that moment.
This differs significantly from using the debit card where the funds are drawn from your account. The situation is different if you’re a merchant requesting for a cash advance. Because the amount involved is usually huge, the bank account will be the main way through which the funds will be deposited.
In the case of using a deposit cash advance, a bank account is required especially due to how the cash advance is to be repaid.
Details Needed To Get A Cash Advance
If you want a cash advance loan, you first have to apply with the lending institution. The requirements may vary. The variation depends on the amount that you want and how soon you can pay back.
Some lending institutions also request for some of these details in order to successfully complete your cash advance application. This will enable them to perform the necessary ‘know your customer’ procedures before any transaction is made. Some details requested for include but are not limited to the following;
• Your name
• Your address and phone number
• Bank account
• Email address
• Recent Cheque stubs to show your earnings each month
• Loan amount needed
Steps To Getting A Cash Advance
In the event that you need to get a cash advance, these are some of the easy steps to follow
1) Request For The Loan Online.
Applying for loans in general and cash advance for that matter online is fast replacing the old way of walk-ins to apply for loans. Time is valuable and people are more conscious of the time that will be spent filling forms, joining a queue etc.
It can be very frustrating if you have to move from one establishment to the other to be approved for a loan.
Thus, the lending agencies of today have thought it wise to develop an online component to support their services. Due to this, everyone in need of cash advance loans can go online and answer a few questions. You then upload the necessary documents and within a short time, you can have your loan.
2) Wait for your approval.
Now, lending agencies are making it easier for approval of loans that are requested for. Once you qualify for the loan, it takes minutes for the loan to be approved. Sometimes, you will be given a cheque of the loan amount.
This does not apply to every lender though. With some, a bank account is the main means by which the funds requested will be paid.
Final Step To Get a Cash Advance
3) Wait For The Money To Be Deposited Into Your Bank Account
This is the final most important aspect of applying for cash advance loans. Getting the funds that are needed to solve whichever situation that has been encountered brings relief to the borrower.
It is worthy to note, that some lenders also allow a cash advance by writing a post-dated cheque indicating the amount they intend to borrow. The fees charged for the exact amount borrowed is also indicated in this cheque.
This will enable the lending institution to know how much exactly is being applied for and what interest rate applies.
The amount requested is then given to the borrower either within a day or the next business day. The lender then waits to cash the post-dated cheque when the payday comes. However, in recent times some lenders have made arrangements for the repayment to be made automatically.
Requirements For A Cash Advance
• Be a minimum of 18yrs old at the time of application.
• Have a stable job for 3 months plus.
• Have an active checking account. An account that has been active for the last 3 months with no bounced checks on the account.
Types Of Cash Advance
1. Credit Card Cash Advance
This is when you use your credit card to “buy” money instead of goods. This happens when you’re faced with a situation where you are short of cash for a purchase you have to make. Credit card companies allow you to draw money from the ATM with your pin.
This type of cash advance accrues interest immediately you borrow. It also comes with a fee that is either charged at a flat rate or at a percentage on the amount borrowed. Generally, its considered as a very expensive way of getting short-term fund.
2. Merchant Cash Advance
This is an advance payment that is made as per the projections on a business’s future income. The cash advance providers give you a lump sum for your business operations and you later pay. E.g. retail shops and restaurants subscribe to this service.
The percentage or amount you pay is known as the “holdback” or retrieval rate which can be between 5% – 20%.
Your average credit card sales determine how much you can borrow. Before you can borrow, your receipts for about three to six months of doing business will be reviewed. You can get up to 250% as your cash advance depending on the credit card transactions that have been made.
Benefits Of Merchant Cash Advance.
Using the merchant cash advance has different advantages. These are some of the benefits to keep in mind.
The Application Process Is Straightforward
The whole process of applying can be done entirely online. All you have to do is to upload your business’s documents such as the credit card processing statements and business tax returns.
There are no hidden requests or requirements that will require days for you to produce. Applications can now be done on the company’s website and your loan process will be done in a short time.
You can be approved very quickly for the loan you apply for. The whole process takes a matter of days. This enables businesses to use the funds for their payroll for example, or other business costs that they have acquired.
You do not need to have a perfect credit
Businesses may need a capital injection and therefore come in for a merchant advance loan. Giving out loans is a risk especially if the company has had debt in the past. This is not a problem when you apply for a merchant cash advance.
The considerations for those who get approved depends on credit card sales and how long you have been in operation rather than on your credit score. People with bad credit history can apply.
Collaterals are not prerequisite
Unlike the traditional methods of providing collateral as a business before getting a loan, a merchant cash advance does not require collaterals. They are unsecured in nature and as such, you can apply and receive the money you need without long processes of credit checks.
This differs from loans where there are collaterals. In the event that there is a default, this asset can be seized and used to pay for the debt.
Flexible Payment option
There is a flexible payment option when you use merchant cash advance loans because your payments are made according to the income that you make for the month. For example, suppose you’re to commit 10% of your credit card received as sales for repayment.
The amount of money that you will actually have to pay will depend on the sales that you make.
This is far different from the known methods of borrowing where you have a fixed amount throughout the life of the loan. In the event that your income is low, you will be found defaulting on payments.
This makes merchant cash advance very convenient for businesses as you will not have problems when it comes to repaying.
Borrowing limits are high
There is some leeway on the amount of cash advance that you can get. Borrowing Limits in the past have exceeded $1,000,000. Once your documents are accepted, you can request for any amount that your business will need to provide you qualify for it.
More Cash Advance Types
3. Payday Loans
Payday loans are also called “payday advance”, “payroll loan”, “short-term loan” or “cash advance loan”. They are cash advance loans that are given to individuals in spite of whether the repayment period is linked to the borrowers’ payday.
One of the main requirements is for the individual to have a previous payroll or employment record. Payday loans can range from as low as $50 to as much as $1000.
In Canada, the rates differ among the provinces. In British Columbia, you pay $17 for every $100 borrowed, in Alberta it went up to $23 for every $100 borrowed. In Manitoba, you also pay $15 for every $100.
3.Payday Loans II
In January this year, Ontario set up its rate to $15 for every $100 whilst in New Brunswick it was also at $15 for every $100.
Nova Scotia had the highest at $31 for every $100. Whilst in Prince Edward Island borrowing with payday loans was pegged at $25 for every $100. Newfoundland and Labrador had its rate at $17 for every $100.
Whether or not you will receive your payday or cash advance loan depends on the regulations that are in your state and the amount of your paycheck.
You can receive your loan into an account after it has been approved. Some employers offer payday loans to their workers at zero or no interest.
Payday loans are very short-term and are required to be repaid immediately the borrowers’ paycheck arrives. Sometimes, if you’re not able to meet the payment deadline, the loan will have to be extended and this will mean additional interest will be charged.
Its’ been estimated that about 80% of payday loans are rolled over.
4. Cash Deposit Advances
There also exists the type of cash advance known as the cash deposit advance, this is when an amount of money is given to you based on your direct deposits that will come in.
The amount loaned to you is then recouped when the deposit is actually made. When the money hits the account it is immediately taken out before other payments and bank charges are deducted.
The bank or lending agency pay themselves back when the borrower gets money in the account. This is convenient for the lending agency because there is no loss and the deductions will be made until the full amount is paid back.
Sometimes when a loan balance is still pending after 35 days, the lender will charge the persons account even if the borrower’s account may end up being overdrawn.
Does Cash Advance Affect My Credit Score?
A cash advance can affect your credit score if you are not able to pay back the money borrowed. Credit scores are very important if you want to go for a loan. A good credit history will mean that lending institutions will be willing to give you the funds you request for.
On the other hand, bad credit history can mean that fewer people would want to offer you credit when it’s needed.
When it comes to cash advance you can build a good credit history with it. For example, it is allowed if you take the cash advance loan for the purpose of paying a bill or unexpected expense a few days to when your paycheck arrives. With this, you will be able to pay back what you borrowed in due time.
One thing to note is that, if you pay back your cash advance on time, it will not affect your credit.
Cash advance loans should not be used for long-term cash deficits nor huge bills that you cannot pay back soon. This will affect your credit negatively and limit your chances of getting funds from other lenders.
Getting A Cash Advance In Spite Of A Bad Credit Score
Having a bad credit history will make you feel uncomfortable to apply for a cash advance. Despite this fact, it’s reassuring to know that most of these lenders provide the loans without credit checks.
The background checks that are done are to ascertain whether the borrower has not fallen behind in payments to another lender. Lenders also check whether your account does not have bounced checks.
How A Borrower With Bad Credit Can Get A Cash Advance
On your part as the borrower, it would be prudent not to worsen the state of your credit. Due to this, it is better if you ask all the questions concerning the terms and conditions that come with the cash advance to get a clear understanding.
If you check and all the information available to you is to your satisfaction, you can certainly get the cash advance loan. Bad credit will not be able to stand in your way of getting the loan you requested for.
The most important factor is your ability to pay it back within the given time. So when you have a bad credit history, you are not left out of the opportunity to apply for a cash advance.
Advantages Of Cash Advance
• You can apply effortlessly
• Some lenders boast of a processing time of less than an hour
• In case you have an emergency you can get a loan without having a security
• After approval, the loan amount requested for is deposited in your bank account
• The process is discreet: any information that is given out stays between you and the lender
Challenges Of Using Cash Advance
• It Is Sometimes Seen As An Industry That Is Set Up To Pry On Unsuspecting People.
This is because it normally caters for low-income earners. With a limit of about $1500, the high-income earners do not usually subscribe to this service. The amount they need is usually huge and thus they will go to the banks.
But it’s been found that there is a high level of financial mismanagement among the lower income groups and the cash advance companies are only there to help. So in some certain sense, it’s not entirely the case as it is stated.
There are so many lenders out there offering different financial services. Your only duty as someone seeking a financial intervention will be to check on them. This is to ensure that you subscribe to genuine services.
Even so, lenders are nowadays very careful because they are aware that peoples sensitive information is being shared with them.
Cash advances are very efficient in helping you to settle any financial emergencies that you currently may not have the money for. The individual or organization applying for the cash advance loan should remember that the repayment should be made on time.
Paying on time gives you more credibility as a borrower. This will make it possible for you to get a loan the next time you need it.
It is best if you use cash advance loans once or twice a year to solve an emergency short-term need. Relying on them too much will increase your expenses because the interest rates can be high. Apply at After Loans Canada now.
Disclaimer: All loans offered through this website are subject to credit and underwriting approval. AfterLoans.ca is a lead referral company, not a lender. AfterLoans only works with financial service providers that adhere to Canadian laws and regulations. Our lenders lend from $500-$5,000. Loans amortization is between 6-36 months. APRs range from 19.99% to 55%. The actual APR charged will depend on the lender’s assessment of your credit profile. For example, on a $1000 loan borrowed for 12 months at 29.9%, the monthly payment will be $97.24; with a total repayment, including interest, of $1166.88 There is also lender’s optional loan protection policy. In the event of a missed payment an insufficient funds fee of around 45$ may be charged (dependent on the lender). If you default on your loan payment plan the lender may terminate the plan and the remaining balance will become payable immediately. Our lenders employ fair debt collection practices, but will pursue the payment of Outstanding debts to the full extent that Canadian law allows.