Ever used cash advance apps? No? Alright, do you even know what they are? What’d you say? You have no clue? Worry not. In this article, I’ll explain them in detail, I’ll also discuss some salient issues around cash advance apps. So keep reading.

Cash Advance Apps

Imagine you need money all of a sudden. You have already exhausted your savings. Friends and acquaintances will probably not lend. How are you going to arrange the money? Enter Cash advance apps. These apps can be a quick way to get money when you need it urgently. Cash advance apps offer loans without credit check, and often with a very short repayment period. Even people with bad or no credit who cannot secure a loan can opt for such loans.

Lately, cash advance apps have become quite popular owing to the ubiquity of mobile devices. All it takes to access these apps is a mobile phone. That’s all. 

How these Apps Work

Simplicity of interface and ease of use are the reasons why cash advance apps have amassed popularity. Find these apps on PlayStore and then pick your preferred app out of a bunch of them, and after a short signup process where you provide basic information as well as a bank account link, you are set to go.

The next step is called advance request. Once you get the approval, you can make a request for advance either through a special form or you can send an email for a specific amount needed. A liquid credit limit may be in the range of $250 to $500.

Repayment should be leveled up on your next payday. The sum over there will automatically be transferred to your linked bank account on top of the fees for any charges made.

Cash Advance Apps Uniqueness

As a borrower, you must understand cash advance apps are unique, as in, their operating model differs from all three main types of cash advances. The three types are:

  • Credit Card Cash Advances: This is a service that is presented by a number of credit card providers that involves cash withdrawal with your credit card PIN. It involves a much larger burden to repay the debt due to high interest rates and additional charges in case the purchases are made using the credit card as compared to the traditional means of purchases.
  • Merchant Cash Advances (MCAs): They are the categories of funds which are not borrowed by private persons but by companies. The lender will provide the necessary cash, which is based on the business’s past sales plus expected future cash inflows, with a fixed percent of daily or weekly sales as their return on investment.
  • Payday Loans: These are small, often very short-term loans, where he borrows money at a very high rate of interest which has to be paid back in full on the next payday of the borrower. As being predisposed to their predatory behaviorals, some states banned them from the wilds for good.

Cash advance apps contrast with all the above types as they focus on small, short-term advances on expected income, while the other three options involve different sources of funds and repayment structures. Cash advance apps also differ from earned wage access apps. The latter type allows you to access a portion of your already earned wages. Apps belonging to this category connect with your employer’s payroll system to verify your income and calculate how much you’ve earned within the current pay cycle. You’re essentially getting a small advance on your paycheck.

On the other hand, cash advance apps don’t directly connect to your payroll. Instead, they assess your income and spending habits through your linked bank account to determine your eligibility and advance amount. You’re essentially borrowing money from the app.

The Benefits and Downsides

The biggest benefit of cash advance apps is the absence of any middleman. With only a few taps, you just might be able to get a fractional amount that will solve a world of problems. Now, one no longer had to go through long hours at the consulate and wait in long lines. Get cash in your checking account within minutes with no delay at all if an emergency arises. Also, regular loans brush off people with low credit ratings, but cash advance apps are built for them. 

But beyond the convenience, there are hidden costs. Subscription fees, and extra charges for quick money transfer might look like nothing at the beginning, but regular use of the apps causes those small amounts to accumulate very quickly. 

Perhaps the biggest downside comes from the ultra short repayment period. Cash advance app fees are often fixed dollar amounts. If the repayment period is annualized, the fixed amount – even though small at the outset – could increase tremendously. This way, the annual percent rate (APR) of cash advance app loans could end up being 10 to 20 times of traditional loan.

Final Words

Frequent use of cash advance apps could have devastating consequences for one’s finances. Many people have fallen into the cycle of debt this way. At the same time, in an emergency-like situation, these apps are perhaps the only thing that could come to your rescue. Hence, one might be responsible when using cash advance apps.

Think of cash advance apps like a very expensive taxi service. It might be a lifesaver if you need a quick ride in an emergency. But if you use it every day to get around, it would be much more expensive than using a regular bus or train.

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