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]]>But if four friends tell you they’re also looking for cash advances today, are you all talking about the same thing?
It turns out, you could be borrowing something completely different. That’s because cash advance is an umbrella term that describes three distinct kinds of loans. Before you borrow, it’s vital you understand these differences to find the best fit for your finances.
Keep reading to compare the different types of cash advance loans you can find online.
A payday cash advance is a fixed, short term personal loan that’s generally seen as a high-cost emergency option. That’s because they’re typically marketed towards borrowers with rock-bottom credit, whose low scores make it almost impossible to borrow other kinds of loans.
Online direct lenders often apply triple-digit APRs, costing borrowers as much as $15 on every $100 borrowed. While this kind of APR may not seem too challenging on its own, it’s compounded by a quick repayment period.
Most payday cash advances are due back by your next payday, which is roughly two weeks from the time you receive your funds. If you don’t have a lot of expendable cash, your next paycheck may not be enough to cover this payment and your usual bills.
Some borrowers can’t keep up, so they roll over their loans to extend their due dates another two weeks. But if nothing about their budget changes, they can fall into a cycle of rolling over debt.
An installment loan is another fixed, short term personal loan. You’ll receive your funds upfront and have to pay them back by a pre-determined date.
What makes them different from payday cash advances, is the length of time you have to pay back what you owe. Due dates can differ substantially between lenders, giving you a few months to a few years to pay off your debts.
Online loans with monthly payments break up your debt into multiple, smaller payments spread out over your term. Depending on your budget, these smaller payments may be easier to handle than a lump-sum payment, even if you’re stuck paying triple-digit APR with bad credit.
Unfortunately, higher interest is almost always a result of borrowing money with bad credit. That’s why financial advisors recommend you put off borrowing until you build up your score by following this step-by-step guide.
This next subsection of advances isn’t a term loan at all but a revolving product. Much like the credit cards in your wallet, a line of credit gives you a withdrawal limit that you may borrow against as you like. You can use all your limit at once for a big repair or make small withdrawals over several months to handle small expenses you don’t expect.
Your use determines how much you owe when you receive your billing statement. Any purchases will tie up your credit limit until you pay off what you owe. But your full limit will be available again for the next emergency once you pay it.
A cash advance loan doesn’t have just one definition but three! Make sure you know which one you need in an emergency. You’ll save time by narrowing your search down to the best fit.
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