A cash advance loan, also known as a payday loan, is a small short-term amount of money due on the borrower’s upcoming payday. The amount of cash advances ranges between $100 to $2500 and is determined by the lender based on local state regulations and the size of the applicant’s paycheck. They come with fees around $15 per $100 borrowed – or even more in some cases and an Annual Percentage Rate exceeding 400%.
Cash advance loans are unsecured loans with no requirement for collateral. As a result, the borrowers do not bring any of their possessions, such as a car or a house, as a pledge to secure the loan. Furthermore, payday loans are known as bad credit loans or no credit check loans in the United States because lenders do not perform a hard pull to make a decision. As a result, people with bad credit can get payday loans, and generally, they are the majority of people who apply for them.
Payday loans are available from banks, credit unions, and online lenders. As a courtesy to their employees, some employers provide cash advance loans or paycheck advances. Terms vary, but no fees or interest are usually charged.
About Cash Advances in the USA
The origins of what we now call payday loans can be traced back to the early 1980s in the United States. Suppose a family is unbanked or underbanked or does not have access to a traditional deposit bank account, the likelihood that they will use payday loan increases.
In the United States, families who use payday loans are overwhelmingly of black or Hispanic descent, recent immigrants, and/or uneducated. According to a Pew Charitable Trusts study, the majority of payday loan borrowers in the United States are white, female, and between the ages of 25 and 44. Americans usually borrow payday loans to cover shortfalls in wages and loans from banks. Besides, they use payday loans to cover their regular living expenses over the course of several months.
Cash Advance Benefits
Cash advances have helped numerous Americans get out of tight financial situations. The most important advantage of payday loans is that you have quick access to cash when you need it. There is no need to wait for banks to open or for lengthy approval procedures. You will receive an instant decision, and money will be directly deposited into your active checking account.
Furthermore, because they do not have to do much paperwork when applying, cash advances are a fast and straightforward solution for many people for emergencies that require immediate cash to fix. The simplest requirements that are obligatory for payday advances are the legal age of 18, permanent residency in the USA, phone number and an email address, income source, and an active checking account.
As mentioned earlier, payday lenders do not require collateral to secure the money; thus, they need an alternative to the collateral to feel confident in the borrower’s ability to pay the debt back. Consequently, online lenders require a source of income, usually $1000 and more, to secure the money.
Finally, taking out a cash advance has no direct impact on your credit or credit score. As a result, cash advances are not troubling when used infrequently, but they are only short-term solutions to meet emergencies.