Often people suffer from a ‘cash crunch’, or rather a shortage of liquid finances, in between two paydays. Public lenders, private lenders and banks engaged in generation of loans and debts have come up with the idea of smaller loans. The denomination of such a loan and the period of repayment, is small which makes it quite easy to borrow and repay this loan. The only drawback of such a loan is that the interest rate, service charges and fees are all quite steep. And you will definitely make a painful face while paying it up. Well, not every apple is sweet from start to finish and you are bound to get a sour taste in some portion or the other. Cash advance loans and payday loans are such loans that help people in times of cash shortages especially between two paydays. Private lenders are at the forefront of the market competition when it comes to bad credit cash advance loans. Apart from private lenders, banks, financial institutions and some other finance companies also provide these services to businessmen or frequent customers who need to borrow frequently for the due course of their business dealings. In such a scenario, the cash advance is more of like an overdraft or over-withdrawal.
What is a Cash Advance Loan?
A cash advance loan as mentioned above, is a short-term loan with a small principal amount, high interest loan that can be availed by borrowers in between two paydays. The following are some common underlying features of such a cash advance:
Principal Amount: The first point that can be highlighted is that these loans principally amount to about 25% to 50% of a person’s monthly salary or income. The amount can be lesser and it is a common convention among lenders to refer to the loan amount in terms of ‘percentage of the borrower’s salary’. This enables the borrower to immediately repay the loan after the next payday.
Interest Rate: The second point that can be remarked upon is the interest of the loan. The cash advance loans, in maximum cases, are loans that have a higher rate of interest. The rate of interest or APR (Annual Percentage Rate) is usually pre-determined and in most cases, it is not in accordance with the credit score or rating. However there are rare cases, where you may find lenders referring to the score in order to calculate interest.
Collateral: The loan is a personal and unsecured loan, due to which the borrower can use the money as he wishes. In case of very dicey applications, lenders demand a small, token security.
Repayment Period: Repayment of such a loan is quite simple and is done usually upon the date of the payday or on the following day. The repayment can also be carried forward to the next month, for a charge. This is something that I really do not recommend as it draws any borrower into a further and unnecessary debt. In cases where businessmen or establishments borrow such a loan, the repayment is done within a few days time, immediately after the business man receives a cash inflow.
Qualifications/Requirements: The qualifying requirements for this loan are not exactly very stringent, but lenders have a habit of giving such a loan to people who have jobs. It must be noted that some essential variants are existent in this type of loan also, such as unemployment loans or bad credit loans.
Being a cash advance facility, the loan’s underwriting and credit check process in itself is not very stringent. In fact, while lending the variant of ‘bad credit’ loan, lenders do not assess the credit reports of the applicant. Instead, lenders prefer to rely on some other, confirmed facts such as, current debt, employment status and current income.
Cash Advance Loans for Bad Credit
Cash advance loans, which are approved irrespective of bad credit, are usually given to people with jobs. The interest rate in such a case, is not exactly low. The following are some of the essential requisites that a person has to fulfill while applying for the loan.
Employment or steady source of income is something that cash advance lenders will look for, before approving the loan.
In case of cash advances, a different repayment mechanism is followed by some lenders. According to such a system, the borrower issues a post dated check to the lenders, and lenders en-cash it after the payday of the borrower.
Another important requirement is that the applicant should have a savings and checking account so that the approved loan can be wired to the lender. There are some loans where no checking account is required, lenders will of course, charge more.