A Financial Advantage: Considerations Before Getting a Cash Advance Loan By Ashleigh Preston At Isnare.com Ezine Articles

If an unexpected bill lands on your doormat in the middle of the month, could you cope? Unforeseen financial situations are part of life and, with a monthly pay cheque, can leave you in a difficult situation if they hit you at a point when there are insufficient funds in your account to deal with them and the usual day to day costs of living. At this point, you may look at a cash advance loan to get you over a financial rough patch. But before you do apply for one, there are a few things to take into consideration.

Put simply, a cash advance loan is an advance against your salary, paid into your account and repayable once your usual salary cheque clears. There are additional interest charges against these small loans, and that amount has to be factored into the repayment as well. If you think that a cash advance loan will leave you in even more financial difficulties in the following month, then it may be advisable to reconsider your plans. However, if you feel that you will be able to repay the loan without due hardship, then there are a couple of other things to consider as well.

How long do you need the loan for?

Cash advance loans are designed as short-term solutions to short term financial problems, merely bridging the gap between a period of financial shortfall and your next pay cheque. If you need to borrow money over a longer period of time, a more traditional bank loan may be more appropriate. If, however, the situation is an unexpected bill or an essential car repair, then a cash advance loan may be ideal. Payments on cash advances can be spread over a longer period, but that will incur additional interest charges, making the loan more expensive.

How much do you need?

Cash advance loans are usually between £80 – £800, although the higher amounts are designed for those on an above-average salary. The essential consideration here is make sure you only borrow what you know you can pay back on your next payday.

Do you meet the criteria?

To qualify for a cash advance loan, you must be a UK citizen, be over 18 years of age, have a bank account with a debit card, and, most importantly, have a regular income that is paid into your account. Before applying for a cash advance loan, you will also need to carefully check the specific criteria of each lender. Certain documentation may be required, such as bank statements, and/or a credit check may be carried out to enable the lender to decide whether to lend you the money.

Are you aware of the cost?

Cash advance loans are a way to get a cash advance on your salary quickly and easily, but they’re not free. Most cash advance companies charge an interest fee of 25%. All finance companies are required to quote an Annual Percentage Rate (APR). If a cash advance loan carries a charge of 25%, the cost over a longer period of time can look extremely high. However, cash advance loans are designed to be repaid quickly, so the important factor is the amount of interest charged within the monthly period and not the APR. On an £80 loan, the interest charge would be £20. You need to consider that you are happy with this level of interest and, more importantly, that you can meet the additional cost without putting your finances into further jeopardy.

Once you have weighed up all the pros and cons, you can then make a more informed decision about taking out a cash advance loan.

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