Should I Consider Cash Advance Loans?

Published on April 23, 2021 by Daniel Azzoli

Person smiling at an atm taking out a cash advance.

If you found yourself facing an emergency expense, would you have the money on hand to deal with? It can be a scary thought for some people. It can also lead you to make some tough financial choices. What do we mean by this exactly?

Well, let’s say you’re driving to work and the tire pressure alert lights up on your dashboard. Slowly, you start to feel your tire losing air and you need to pull over. A flat tire may not seem like a particularly noteworthy occurrence on the surface, but it can lead to some significant consequences. If driving is your only option to get to work, you’ll need to pay for repairs or a new tire altogether. Otherwise, you can risk missing time at work which could impact your paycheck if you get paid hourly. Ultimately, this could lead you down a slippery slope.

So, if you find yourself in a situation like this and don’t have the funds to handle your emergency expense, what can you do? Well, one option may be to use a cash advance. But just because it may be a potential solution, doesn’t mean it’s an easy decision to make. You’ll need to consider things like whether you can afford it, how you plan on paying it off, and what future implications this could have on your finances.

If you’re considering applying for cash advance loans, these are some questions you’re going to need to work through. So, we’re going to look at some important topics surrounding cash advances, like when to consider one, things to look out for, and potential cash advance options.

What Is a Cash Advance?

To begin with, we should take a look at what a cash advance is exactly. While it’s not necessarily complicated, the term “cash advance” can refer to a couple of different things. For starters, it can refer to cash advance loans, which are short-term loans that you can apply for with banks, credit unions, and other types of financial institutions. You can apply for a cash advance online in some cases, or through storefront lenders. If you’d prefer to apply for one in person, go online and search something like, “cash advance near me” to see what options you may have in your area.

person getting a cash advance from an atm.

On top of that, it may also be referring to the action of withdrawing cash from an ATM through your credit card. The amount that you’re able to withdraw can vary, but it usually won’t exceed your credit limit for that particular credit card. The difference here between withdrawing money through your credit card versus through your debit card is that when you withdraw funds through the former, your borrowing money from this financial institution instead of taking out money that’s actually yours. Doing this usually comes with high interest rates and/or fees that’ll generally be higher than the rates on your normal credit card purchases.

What to Look Out for With a Cash Advance

If you’re considering applying for cash advance loans or taking a cash advance through your credit card, there are some important factors to consider before you pull the trigger. After all, this isn’t a decision that should be made lightly, so you’re going to want to consider things carefully before making any moves. Let’s take a look at some of these below.

1. High Interest Rates and/or Fees

Like we’ve already touched on, you’ll generally see relatively high interest rates and/or fees with cash advances of any type. This is why they should only be used in emergencies as a last resort, and you’ll always need to have a plan to pay them back on time and without damaging your financial standing in other ways. There are also fees that may come with cash advance loans, on top of the already steep interest rates.Don’t forget to factor these into your repayment plan.

2. You’ll Start Accruing Interest Immediately

Whenever you make a regular purchase with your credit card, there’ll be what’s called a grace period. During this time, you can pay off what you owe before interest starts to build up on your purchase. The difference with a cash advance is that there generally won’t be a grace period, meaning interest will start to build up immediately.

3. Relatively Lower Limits

Like we mentioned, if you’re looking to take a cash advance through your credit card, the max amount you can take out will likely be lower than your credit limit on that account. So, depending on the size of your emergency expense, you may not be able to cover the entire cost.

Additional Factors

These are just some of the important factors to keep in mind. You’ll also want to make sure that you ask yourself the right questions before applying for a cash advance. Consider things like:

  • How am I going to use this money?
  • Does the situation I’m in constitute an emergency?
  • Will I be able to pay back what I’ll owe?
  • Are there are other alternatives?
person researching cash advance loans on their phone.

Always make sure that you’re evaluating these important considerations and don’t ever apply for a loan you can’t afford. If you do apply for cash advance loans of any kind, make sure to incorporate your payments into your normal budget.

When to Consider a Cash Advance

Like we’ve already mentioned, because of the steep interest rates and potential fees, cash advance loans should really only be used as a last resort in emergency situations. Having said that, there may be some scenarios where they can be used effectively. These can include:

  • When you need to take a trip to the emergency room.
  • When you’re dealing with a non-routine car repair that could get worse if you don’t fix it immediately.
  • When you need to take care of an essential home repair.

If your savings won’t be enough to cover any of these types of expenses and you have no means of getting funds elsewhere, cash advance loans may be a viable option. This should only be a route you take if you know you’ll be able to pay back what you’ve borrowed.

Types of Cash Advance Loans

As mentioned, when you’re in a financial bind, a cash advance may be one of your options. There are different kinds of products out there that could give you the financial help you need to handle your emergency expense. Let’s take a look at two common ones.

1. Installment Loans

An installment loan is a fairly common type of personal loan. If you get approved for one, your funds will come in the form of a lump sum which you’ll then need to pay off in scheduled installments. The amount of time it’ll take to pay off your loan (the term of your loan), can differ between financial institutions and based on the type of installment loan you’re looking to get.

Each scheduled payment will usually be the same amount, and you’ll have plenty of advanced warning of when these payments are due. In fact, you should get your whole repayment schedule right at the beginning of the process. This can help you find ways to integrate these payments into your budget.  

2. A Personal Line of Credit

A line of credit shares a lot of similarities with a credit card. One of the overlapping features is that they’re both a type of revolving credit. Unlike an installment loan where you’ll be given a lump sum, you’ll be given a credit limit instead. You can then draw money up to this limit as long as you have available credit and your account is in good standing.

Person wearing striped shirt researching cash advance loans on their computer.

So, how can the revolving nature of a personal line of credit be of use to you? Well, the main potential benefit is that you can decide how much money you want to borrow (assuming it’s within your credit limit), and when you want to borrow it. This makes it a particularly flexible borrowing option. It’s also important to note that in terms of the interest and/or fees you’re charged, this will be on the amount of money you borrow, not the total amount of your line of credit. So if you borrow $100 from your $1,000 limit, you’ll only be charged on the $100 you’ve borrowed.

Don’t Take Major Financial Decisions Lightly

Like we mentioned in the intro, being in a financial emergency is no laughing matter. When you have an immediate financial need and don’t have the money to take care of it, it may feel like you have nowhere to turn to. But the truth is, there are financial products out there that are designed to help people in your predicament.

The important thing to remember in these situations is that you always need to educate yourself on your potential options as well as you can. Your financial standing is an important part of your life, and any decision that could have a big impact on it shouldn’t be taken lightly. So, before you apply for cash advance loans or any sort of financial product, do your research beforehand.

If you want to educate yourself on some of these financial products, or just improve your financial literacy in general, comb through our blog section for useful personal finance tips and information!

Disclaimer: This article provides general information only and does not constitute financial, legal or other professional advice. For full details, see CreditFresh’s Terms of Use.