Life is unpredictable, especially when it comes to raising a family. Even if you’re able to pay your bills every month, sometimes you’re hit with a sudden expense that is out of your budget. Your car breaks down, and you need to pay the mechanic right away; your dog is injured, and you must take them to the vet for a costly procedure a few days before payday. Any of these, and thousands of other scenarios, can make you desperate for a bit of money to tide you over until your bank account fills up again.
If you are in need of immediate cash and are short on funds, cash advances can offer a solution. Cash advances are a type of short-term loan that is meant to be repaid in a short amount of time. In this article, we will explain how cash advances work and what you should consider before taking one out.
Bank cash advances are an option if you’re in a pinch
A cash advance is a short-term loan that is typically due on your next payday. It allows you to borrow money against your next paycheck, providing you with immediate cash when you need it most. Cash advances are also known as payday loans, cash loans, or check advance loans. A bank cash advance means that you are working directly with the institution where you usually do your banking rather than with a third party like a payday loan center.
Bank cash advances are usually cheaper than working with a third party, as the institution already has an idea of your trustworthiness and ability to repay the loan. For example, Varo Bank will not charge you any fee for a $20 cash advance, and their fees are lower than those for other lenders; they also don’t charge interest for advances.
How do bank cash advances work?
To obtain a bank cash advance, you will apply directly to the institution where you do your banking; it must be noted that not every bank offers this service, so be sure to double check that your bank has this feature.
If you are approved for a cash advance, the funds will be deposited into your bank account. You can use the money for any purpose, such as paying bills, covering unexpected expenses, or making purchases.
When it comes time to repay the loan, the lender will typically withdraw the full amount from your bank account 30 days after you borrow the money. If you cannot afford to repay the loan in full, you may be able to roll over the loan for an additional fee.
There are some costs involved
Firstly, it should be noted that bank cash advances have some benefits over more traditional cash advances, including that they don’t charge interest.
Traditional cash advances can be expensive, with fees and interest rates that are much higher than other loans. Lenders may charge a flat fee for the loan, such as $15 for every $100 borrowed. In addition, they may charge interest rates that can range from 300% to 700% APR.
While bank cashes don’t have this added risk, you will still be paying fees to take out a cash advance. The fee will be higher depending on how much you borrow, ranging from $0 for a $20 cash advance to $15 for a $250 advance. While this is much cheaper than for a payday loan company, it will still bite into your budget.
If you cannot repay the loan in full on your next payday, the lender may allow you to roll over the loan for an additional fee. This fee can be substantial and may add up quickly, so be careful that you only borrow as much as you need.
Carefully consider if a bank cash advance is for you
Before taking out any cash advance, it is important to consider the costs and the potential risks. Here are some factors to keep in mind.
While bank cash advances are lower risk than those from a traditional payday loan company, you will still pay some fees, which will be higher the more than you borrow. You should only take out a cash advance if you are sure that you can repay it in full on your next payday. Make sure that you understand the repayment terms of the loan, including the due date and any fees for late payments or loan rollovers.
It’s doubly essential that you pay on time, because cash advances may appear on your credit report if you fail to repay the loan. This can negatively impact your credit score, making it harder to obtain loans in the future.
Before taking out a cash advance, make sure that you have a budget in place to ensure that you can afford to repay the loan in full on your next payday.
Conclusion
Bank cash advances can offer a solution for those who need immediate cash, but it’s important that you understand the costs and the repayment terms. These advances are lower risk than traditional cash advances because the fees are lower, and some institutions also do not charge any interest as long as you pay on time. With careful consideration and budgeting, you can make an informed decision about whether a bank cash advance is right for you.
