Why Payday Loans Are Better Than Cash Advances

When you are in need of a quick fix for cash, there are several sources in most lives for coming up with this quick cash; you could either borrow the money from friends or family, pester your boss for an advance in your salary, get a cash advance from your credit card, or you could turn to a payday loan to help with your financial shortfall. These last two options tend to be the most commercially popular, but which one makes the most financial sense for you and your situation? Generally, you may want to turn to the payday loan in order to save time, money and stress!

Save Time

For our example, we'll take out a payday loan of $100 compared to getting a cash advance for $100 on a brand new credit card with no balance. In order to follow the terms of your average payday loan, you will pay back that loan within two weeks, paying a flat fee of $15.00 or so plus the loan principal which means that in two weeks your loan will be finished, over and done with for a meager $15.00. If you went with a credit card advance, you will have a minimum payment due on the loan each month until the loan is repaid. If your minimum payment is $10.00, it will take you one year to pay off that loan and interest. That's one year to pay back a simple $100 cash advance.

Save Stress

The time savings from a payday loan will bring with it another great benefit over taking out a cash advance on your credit card. Debt, whether you have the finances to manage it well or not equals stress in some form or another. A quick payday loan taken out, for whatever reason, will be paid for and done before you know it. A credit card advance, on the other hand represents stress in the form of repayment demands for up to a year under the best of circumstances, probably for much longer under normal or extreme circumstances.

Save Money

Now we get down to it. You may have heard that payday loans have high interest rates or APR - much higher than credit cards, but that figure is only true if you actually held out a payday loan for an entire year - which no one gets to do under normal circumstances. If you do the math for a $100 loan taken out with a $15.00 repayment fee in 2 weeks, you will have paid $15.00 in interest for a loan, however if you took out that $100.00 as a cash advance on a credit card earning an average monthly interest fee of 29%, it would take you a year to repay the loan at minimum repayment levels.

That is under perfect and optimal circumstances, but in all likelihood you will be taking out your cash advance on a credit card that has a balance, and many credit card companies automatically put the repayment of these advances (at the higher interest rate) at the bottom of your repayment schedule. This means that repayment doesn't actually begin until you've paid off all the items that were on your credit card balance before you took out the cash advance. This means that your cash advance is likely to stick around for a very long time at the interest rate you got it at, very quickly outpacing even the compacted APR percentage you would have paid on a payday loan.