4 Reasons To Choose A Payday Loan Over A Credit Card Cash Advance
If you are in a serious financial bind and need money fast, you may be debating whether to take a cash advance on a credit card or apply for a payday loan. While both offer distinct advantages and disadvantages, payday loans tend to offer more benefits. Here are just a few.
1. Timing
Unless you already have a credit card, it can take weeks from the time you apply for a credit line to the time you receive approval for a credit card. Obviously, that poses a problem if you need quick cash to cover an emergency money situation. Payday loans, on the other hands, are available much sooner, as they are disbursed directly to your bank account.
2. Quick Availability of Cash
If you have a credit card, you may not have enough credit available on the account to give you the amount of cash you need. With a payday loan, the maximum amount you can borrow varies by state and your ability to repay the loan when you get your next paycheck.
Credit card companies also pull your credit report before determining whether to extend you credit. When you apply for a payday loan, you must provide your social security number and a verifiable source of regular income. Generally, a payday lender doesn't request a credit report unless it has reason to suspect that you defaulted on previous payday loans.
3. Shorter Repayment Period
Generally, you pay off a payday loan faster than a credit card cash advance. Payday loans are set up to pay back your loan during your next pay cycle. If you don't pay off the loan in full at that time, your repayment will be set up to pay off the balance within a specified number of pay periods.
Cash advances can take longer to pay off unless you pay the balance in full when you receive your monthly credit card statement. Even if you want to repay the short-term loan immediately, credit card companies handle merchandise purchases and cash advances differently. Normally, the payments you make will not be applied to cash advances until the balance on your merchandise transactions are paid. This allows the higher interest rate card companies charge for cash advances to accumulate, increasing the principal balance you owe.
4. Effect on Your Credit Score
Cash advances can have a bigger impact on your credit. The amount of credit you use is a key factor in calculating your credit score. If you take out a cash advance on a credit card, you lower the amount of credit you have available and your credit score.
Payday loans work differently. Because they are quick, short-term loans, payday advances usually aren't calculated in your credit utilization ratio. Furthermore, while payday loan lenders vary in whether they report to credit bureaus, many don't report accounts to credit agencies unless you miss the repayment date or the account is sent to collections.
To learn more about payday advances, contact Las Vegas Finance.
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