Unfortunately most of us face unforeseen financial emergencies at least once in our lives. When those money crunches happen, some people seek out cash advance loans in order to help them get by. Another option is to simply take a cash advance from an existing credit card. But what are the differences between these two options and is one better than the other?First, we should briefly discuss what a cash advance loan is. They are also known as payday loans and by working with one of the numerous lenders offering such services, consumers can borrow money in order to get cash to help them get by until their next paycheck (hence the name “payday loan”). The assumption is that the borrower will be in a better position to pay back the loan once they get their next paycheck and at that point, will hopefully be back on their feet.Usually, to get a payday loan the only requirements are proof of employment and a statement of your income so that the lender can determine how much they can safely loan you. The way this is determined varies from one lender to the next but most payday loan companies offer loans from $500 to $2000 depending on those factors just mentioned. You can find payday loan companies in your local area, but most people tend to look for lenders online since it is more convenient and anonymous.On the other hand, a credit card cash advance is slightly different. First, there aren’t the same sort of requirements to qualify for a cash advance since you already hold the credit card. There is also no presumption that you will repay the amount borrowed once you receive your next paycheck. Finally, there aren’t any additional penalties in the form of interest payments or late fees that you have to pay if you don’t repay the loan by your next paycheck, which is one of the drawbacks of payday loans.Even though it may seem that taking a credit card cash advance is a better option, that is not necessarily the case. First, you need to have a credit card in order to use this option and unfortunately, many people who end up in this type of situation either don’t have a credit card or don’t have enough available credit to borrow against to take care of their immediate financial needs.Also, by borrowing against your credit card, you are increasing the balance you own on your card. Credit bureaus often use that figure and compare it to your available credit to see how close you are to being “maxed out” on your credit cards. So by taking a cash advance, if you are unable to repay it in the near term, your credit rating could be lowered. By using a payday loan, you don’t have to worry about anything being reported to the credit bureaus because most cash advance lenders don’t generate such reports.On the other side of the coin, payday loans have some drawbacks that you should also be aware of. The most important thing to keep in mind is that dollar for dollar, cash advance loans are a more expensive loan, which is why it is important to be able to pay it back as quickly as possible. In fact, if you are unable to repay by the agreed upon time, you will probably be charged a late fee which only adds to the problem.Ultimately, the decision between a cash advance loan or taking a cash advance from your existing credit card depends on your specific needs, your ability to quickly repay the loan and how comfortable you feel with the terms that each option offers. But either way, your best bet is to take action and do something to solve your immediate financial problems, pay back the loan quickly and hopefully avoid similar situations in the future.
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