How to Pay Off Cash Advance Loans and Save Money
A cash advance is a short-term loan anyone can get because it does not require a hard credit check or a high credit score. As long as you can show proof of regular income, you are eligible for a cash advance.
You can get online cash advance loans with AdvanceSOS online or borrow at a loan center. Once approved, you can get the amount you borrowed in three ways:
- You can go to your bank and make a cash advance request using your credit card.
- If you have your credit card PIN, you can withdraw your cash advance at the nearest ATM. In case you don’t have the PIN, you can call your credit card issuer and get a cash advance request.
- Some credit cards have convenience checks. You can write a check for yourself and then cash it in or deposit it in your checking account.
In terms of repayment, the best way to pay it off is to pay it as fast as you can. Note that these types of loans do not have a grace period. Moreover, the interest starts the moment you receive the loan. So if you don’t want to get burdened by high-interest rates, pay your loan as soon as you can.
For example, a $200 cash advance with a 25% APR will accrue a monthly interest of $4. That might look small if you’re able to pay it immediately, but if you fail to pay it on time, the interest can mount up to $24 in 6 months.
Cash Advance Terms and Fees
While $24 seems small, the number adds up quickly when combined with the hefty fees and interest rates. Here are some of the charges your loan might incur:
- Annual percentage rate (APR) – Cash advances have higher interest rates compared to balance transfers and purchases. A lot of credit cards will have a zero percent APR on their first 12 to 18 months on purchases and balance transfers, but after that, they will have an APR that ranges between 16% and 25%. However, a credit card cash advance will have an average APR of 25% to 27%.
- ATM fees – If you get your cash advance through an ATM, there is most likely a fee of around $2 or $3.
- Cash advance fee – aside from the ATM fee, your credit card issuer will most likely charge a 5% fee of the total amount of your cash advance. So if you borrowed $200, expect a $10 fee.
In addition to the high-interest rates, a cash advance often has a different credit limit from your purchase limit. If you have a $1,000 overall limit, don’t expect to have the same in your cash advance.
The Cost of a Cash Advance
You might still be wondering how much the cash advance loan costs. Here’s a visual breakdown of a $500 CA loan together with the fees and interests.
|5% Cash advance fee||$25|
|Repayment term||58 days|
|Total fees and interests||$390|
The convenience of getting $500 without a complicated application process will cost you 78% more than the total amount you borrowed. On the other hand, if you paid your cash advance in 12 months at $50, you will have an interest rate of only around $70.
This example stresses how important it is to pay your cash advance loan as soon as possible so you won’t end up paying more than you bargained for. If you think you cannot pay the minimum amount, it is better to save your money and look for other options.
Alternatives to Cash Advance
You might get in a situation where you think cash advance loans are the best way to get money. Looking at the example above, it should be your last resort. Instead, consider the following alternatives before thinking of getting a cash advance.
Borrow From Family or Friends
A lot of people try to avoid borrowing money from friends or family because it might damage their relationships. But as long as you draw a clear contract regarding the loan repayment and you honor the terms, this option is much better than a cash advance loan.
Get a Personal Loan
A personal loan also has a high-interest rate, but its terms and fees are lower compared to a cash advance loan.
Ask for a Loan Extension
Cash advance creditors generally do not give extensions or grace periods. However, it won’t hurt if you ask for a repayment extension.
Although cash advances provide a convenient way to get quick cash, it should be your last option due to the high-interest rates and fees. Try the other options that are suggested in this article. Maybe seek assistance from friends or family or perhaps get a personal loan. Only until you have exhausted all the other alternatives should you resort to a cash advance loan. If you want to know more, check out our blog, where we tell you about cash advances or even how to start a cash advance loan business of your own. We have tons of topics that will help you understand different types of loans.