Cash Advance Loans – Are They Worth It?

Many companies are now in the business of offering cash loans for a very short period of time – usually referred to as cash advance loans. The key difference between a cash advance loan and a a normal personal loan, other than the timescale, is the cost of taking out such a facility. Let’s take a look at exactly how it works.

Cash advance loans are short term loans which are given to help you cover expenses which fall due before you are paid your salary or wages. For example, if you are paid on the 15th of each month, and a bill falls due on the second of the month, running out of money early will not allow you to pay that bill.

Hence, in this situation, you could take out a cash advance loan for the amount of your next payday, so that you are able to use the money sooner than you actually get it - with full knowledge that you will be able to repay it as soon as it is paid to you.

What Will It Cost?

Obviously, if you are going to be borrowing money from the company, you will be expected to compensate that firm for the risk of allowing you to access this money in advance. Because of the short-term nature of such a loan, interest charges are fairly ineffective at providing a return for the lending company.

Hence, most corporates who offer cash advance facilities usually charge a flat rate fee for the service. For example, if you were to take a cash advance loan of $500, you may be charged 5% of this as the fee - which would result in an overall cost of $25. The condition of this is that you must pay back the amount within the specified payback period - usually two weeks to one month.

Not All Cash Advances Are the Same

Much like all other industries in this world, not all cash advance products are the same. There is quite a bit of differentiation within the industry - namely on the points of cost, service, and repayment period.

As a recent task, we reviewed some of the major cash advance lenders, and rank them on the three points listed above. Our results were particularly interesting, and we have provided a link to the best company below.