Cash Advance

A cash advance can refer to short-term payday loans, or to cash given against a line of credit.

To receive a cash advance for a payday loan, most lenders require pay stubs or bank statements. Typically, two of whichever record are required, along with proper identification, such as a driver’s license or identification card with a photo. This provides the lender with sufficient evidence of a steady income. Often, a post-dated check for the amount of the loan and fees is given as further security and promise of payment. In an online environment, checking account and bank routing numbers are given to satisfy the same security issues for lenders. If a borrower’s income proves to be insufficient to pay the loan on the date agreed, the lender has permission to cash the check or withdraw the funds from the borrower’s account.

With these minimum requirements met, borrowers are given access to cash in advance of their paycheck to provide for immediate budget needs. It is interesting to note what payday lenders do NOT require when issuing an advance. Borrowers are not required to give any detailed budget of their spending activities when receiving a cash advance. As long as sufficient evidence of their ability to repay is provided, the cash may be given. Borrowers may use the cash for whatever purpose they wish. Borrowers are often not required to provide access to their credit reports. Most payday lenders will give cash advances without credit checks, due to their willingness to provide services to any individual in need, regardless of past history. A current source of income allows a borrower to repay the amounts of loans that are smaller and that span a shorter amount of time than larger loans from financial institutions that have stricter policies. In an online environment, borrowers are often not even required to be associated with customer service representatives if they desire privacy in sensitive situations. Online forms and payment methods allow for instantaneous results with little human intervention, while customer service options are available to establish legitimacy and trust on the part of the lender’s reputation.

Credit line cash advances draw on a previously established line of credit or credit card account. Typically the interest rates and length of time before repayment impact the consumer more financially than the one-time payments on cash advances from the payday loan industry. Credit line cash advances are often available through Automated Teller Machines (or ATM’s) or by personal checks that draw from the credit line and act as cash. Most retailers accept these cash advance checks just like they would for checks connected to checking accounts. The other means of receiving the advance is through a teller at a local credit union where the borrower has a line of credit open, or after they open such an account. Besides credit unions, mostly all of the major credit card companies provide for cash advance options for their credit line customers. Typically these funds are repaid over long periods of time as borrowers are notified of their ongoing obligation through monthly statements. These statements include information about the amounts borrowed, the interest accrued, minimum amount due and due date, and the payments already made.

Personal loans through payday cash advances, on the other hand, are typically repaid within one to two weeks. However, many states require long-term repayment options to be available for these types of advances should a borrower default on their loan. The resulting repayment system that is negotiated between the borrower and the lender under these conditions acts similar to the credit line cash advance repayment system described above, with statements and repayment schedules occurring monthly in most cases. Some borrowers also face financial situations that require a few payday cash advances in a row until enough money can be earned by the borrower to offset their obligation to the temporary cash advance lender. These borrowers use their paycheck to pay for their first cash advance while rolling over to another cash advance to survive for the next week, making them essentially only one week behind in their earnings. These rollovers, or “flipped” loans, as they are often called, allow for an extended time period of sustenance until normal circumstances resume for the borrower. This circumstance is certainly less than ideal, but unfortunately some emergencies necessitate such a condition, and the payday loan industry fills the needs that arise from these unusual events as well as the more common temporary cash advance to support an individual for one to two weeks.