What’s a short-term, high-risk loan that’s easy for borrowers of all backgrounds to access? If you answered either “a payday loan” or “a cash advance,” you’re correct. However, these answers are two completely separate borrowing options. Let’s take a closer look at each so you can understand what makes these alternatives some of the riskiest ones available.
What Are Payday Loans?
When shopping around for a fast financial solution, you’ll often come across two short-term options: payday loans and cash advances. Payday loans are a popular selection among borrowers, because they rarely require credit checks and can quickly supplement an entire paycheck. However, lenders often lace them with hidden fees and unattainable terms and conditions that put borrowers in extreme financial distress.
Lenders decide how much to loan based on each borrowers’ monthly income, and the entire amount borrowed is due in full by the borrower’s next pay period. And because payday loans accrue immediate interest that piles until repayment, borrowers often end up paying upwards of 200% in interest on top of the principle amount borrowed.
What Are Cash Advances?
There are two types of cash advances: standard cash advances, which resembles the borrowing structure of payday loans, and credit card cash advances. Similar to payday loans, standard cash advances are another type of unsecured debt that accrues immediate interest and requires timely repayment.
However, credit card cash advances allow you to draw cash from your own line of credit, and the amount withdrawable is calculated as a percentage of your credit limit. Your terms of repayment will most likely fall under the rules of whichever credit card you choose to advance, and you may be required to fully admonish your cash advance debt before using the same card for another financing decision. Partnered with high interest rates and an entirely separate sets of fees, credit card cash advances are another risky alternative for even the most responsible borrowers.
Secure Financial Decisions
Although payday loans and cash advances are two separate borrowing options, they share some unfavorable features, including extra fees, interest, and risk. If you’re in a tough financial situation and are considering a quick way to access cash, contact the consultants at Progressive Debt Relief first. We can walk you through how these loans work and provide insight into the potential dangers these loans present, as well as, how you can get out of unsecured debt. For more information, call us today at 1-877-590-1847.
