Cash Advance Offers: What You Should Know About Them

Cash advance offers can help you during financial difficulties. You can take them if you need to settle medical expenses, pay school bills, or go shopping.

While they can come through for your emergencies, there’s the issue of high interest rates and short repayment durations. But you can still get better offers if you learn a thing or two about them. 

To this end, we’ll discuss cash advances, their types, and how to calculate your interest rate so you can get the best offers. 

What this article covers:

• What Is a Cash Advance?
• Types of Cash Advance Loan Offers
• How to Calculate Cash Advance Interest

What Is a Cash Advance?

A cash advance loan is the amount you borrow against your credit line, salary, or future earnings. You can classify it as a short-term loan, as you’ll have to repay it within short periods, usually within one to three months. 

Also, you only have a limited amount you can take out at once. You can expect a minimum of $200 cash advance offers up to $5,000. 

Further, most cash advance offers come without security. In other words, you may not have to deposit collateral to take out a loan. 

While loans without security are a high risk on the lender’s part, cash advance lenders often use alternative measures to reduce this risk. For instance, you’ll need to submit some copies of your income statement to access some cash advance offers. 

In other cases, some lenders include a Continuous Payment Authorization (CPA) in their policy. This way, they can collect the money owed from your bank account automatically. 

However, these depend on the type of cash advance loan and the lender’s offer. 

Types of Cash Advance Loan Offers 

There are three types of cash loan offers. We’ll discuss them in detail below.

Merchant Cash Advance 

Merchant cash advances offer an alternative source of funding for small businesses. In a loan definition, they may not be classified as one. This is because an MCA provider offers businesses money for their future credit card sales instead of cash for repayment. 

For instance, a business might give out $30,000 worth of its future credit card sales to a lender to get $25,000 in cash. After the transaction, the lender can fix its interest rate on those credit cards. 

Usually, small businesses that can’t get loans from traditional banks can consider merchant cash advance offers. 

MCA lenders don’t consider credit scores – they look into your sales performance through online channels. Also, it’s convenient and doesn’t put you under pressure to repay, as repayment depends on sales volume rather than your income flow.

Payday Cash Advance 

A payroll loan advance is an amount taken against your salary. In other words, you need to be employed or have a stable source of income to access payday cash advance offers. 

You can get a payroll cash advance from several online lenders and banks. Some employees also provide a pay advance option for staff members. 

Further, lenders usually request proof of earnings before approving your loan. They check the report to assess your monthly income and how much you qualify to take out.

Usually, you can take out only a determined percentage of your monthly income. For instance, the lender can offer you 40% of your monthly earnings. So, you can take out a maximum amount of $400 if your monthly income is $1,000.

Credit Card Cash Advance 

You can get a credit card cash advance online in minutes. Like credit card loans, the card provider offers you a percentage of your credit line but transfers the fund into your bank account instead of placing it on your credit card. 

The rates and terms for this also differ from that of credit card loans. For instance, you can expect to pay up to 400% in APR on credit card cash advances. 

To process a cash advance on your credit card, you can place a request on your card provider’s website or send them an email concerning it.

How to Calculate Cash Advance Interest

With knowledge of calculating the interest on your cash advance loans, you can select the best offers.

To calculate your interest on cash advances, get the details of your interest rates from your loan contract. You can check the lender’s website if you’re yet to apply for the loan. Then, enter the details into the formula below. 

Daily Interests = ((loan amount x (APR%)) / 365) + the flat fee

For clarity, here’s an example:

Assuming you’re taking out a $1,000 cash advance on your credit card with an APR of 24% and a flat fee of 3%. Your calculations will be:

Flat Fee = $1000 x 3/100 = $30

Yearly Interest = $1000 x 24/100 = $240

Daily Interests = 240/365 = $0.65/per day. 

Monthly Interests = 0.65 x 30 days = $19.5/per month. 

Assuming your loan is due in a year, you’ll repay $270 ($240 + $30) interest plus your loan amount, totalling $1,270. 

In another instance: 

Assuming your loan is due in three months, you’ll repay an interest of $19.5 for each month plus the flat fee of $30, totalling $88.5. Your total repayment amount will be $1,088.5.

Scratch that. If you’re not a fan of math, you can use the loan calculator on your lender’s site. 

Conclusion 

Cash advance offers come with high fees, which you might find uncomfortable paying. However, understanding how they work, what types of offers you can get, and how to calculate your rates can prepare you for what to expect.