Know What You Are Getting Into
What’s the Risk of Taking a Cash Advance that is More Than I Need? If you are asking that question then you may be in over your head already. An advance on your future paycheck should never be taken lightly. A large cash advance will put you in a bad spot when you take out more than you need. Remember, when you get an advance in pay you will be missing that amount of money when the loan becomes due. When you’re already having financial difficulties this can make it much worse.
Budget, Budget, Budget
The biggest mistake people make when getting a cash advance is not figuring the loan amount into their monthly budget. People tend to put it in the back of their minds focusing only on their current troubles. When the time comes to pay back the loan they find themselves broke again. This is where the vicious cash advance cycle comes into play. A person has just enough to pay the current loan forcing them to take out another to get through that week.
Consider The Rates
You also need to consider how much it is going to cost you to get the cash advance you need. Lenders charge anywhere from 15% – 50% of your overall loan. If you were to borrow $100 it could cost you up to $50 in fees! Technically that would be a 50% pay cut on your next paycheck. Even if you are lucky enough to get a lender with a low fee, that’s still a 15% pay cut. Can you really afford that?
Smaller Is Better
The cash advance loan is for an emergency situation when you need a small advance of your pay. Never take a cash advance of your entire check or you will be stuck in the same situation all over again. Don’t mistake a cash advance for a “typical long term loan”. There is no grace period in a cash advance and the lender will require you to pay the balance in 7 to 14 days.
Be Smart
There are always risks when you take a cash advance for more than you need. It is bad enough that you have to resort to this lending solution to begin with. Get in over your head and you end up robbing Peter to pay Paul. Getting one cash advance to pay another will sink you faster than you can swim. Be informed, be smart and budget your finances. Try to come up with an alternative solution to your financial problems before deciding to get a cash advance.
