Cash advance options and alternatives to cash advance apps

While an online cash advance can be convenient, there are significant drawbacks to consider. These loans are costly and come with brief repayment periods that can lead to a vicious cycle of debt. Because of this, they should only be used as a last resort. Instead, consider more affordable alternatives. 

How a cash advance works

Online cash advances are small, short-term loans or apps that allow you to get a portion of your paycheck early. Most online cash advances are payday loans because the entire balance plus fees must be repaid by your next pay period. However, even the best cash advances can have a high annual percentage rate (APR), with most loans in the triple digits. This makes cash advances a risky and expensive way to borrow.

In most cases, the process to get a cash advance is simple. You fill out an online application and submit documentation to verify your personal, employment and income information. From there, you will receive the terms for your advance. Be sure to review them carefully so you fully understand how much you’ll pay, repayment terms and fees. 

If approved, the cash advance company will need access to your bank information to deposit funds and withdraw a payment. Most cash advance companies will automatically deduct the amount you’re advanced from your next paycheck. Payday lenders may allow you to roll over or extend your repayment date, although this option can be risky and lead to even more debt.

Will a cash advance hurt your credit?

Depending on the type of cash advance you get, you may or may not face a credit check. Payday and other short-term personal loan options typically won’t check your credit, but there are lenders that will. In general, cash advances are based on how often and how much you get paid. This is used to determine how much you’re approved for and when you will need to repay. 

However, just because you don’t need a credit check to apply doesn’t mean that your credit is safe from future damage. If you miss any payments or default, your credit can be affected, harming your chances of getting other financing in the future.

Alternatives to an online cash advance 

A bad credit personal loan can provide lower rates and a longer repayment term than a cash advance payday loan. If you don’t qualify, financial technology companies now offer online cash advance products that are much less expensive than payday loans.

You may also have access to a cash advance on your credit card or the ability to use a buy-now-pay-later plan.

Short-term installment loans

These loans may be advertised as payday loan alternatives because they offer repayment terms of several months or even years but still allow you to qualify with little more than proof of income. They can be funded as quickly as payday loans in most cases.

However, they aren’t cheap. Most charge triple-digit APRs, much higher than other emergency loan options. Some require biweekly payments, which can squeeze your budget if you’re already struggling to cover expenses between paychecks. NetCredit, OppLoans and RISE all charge high fees that result in triple-digit APRs — however, they are still good alternatives to more predatory lenders on the market.

Emergency loans

An emergency loan is a type of loan that can quickly cover unexpected expenses, such as medical expenses and home repairs.  There are several options available, so do your research before committing to a lender. Your credit score and income will be key factors in the APR you receive. Comparing emergency loan rates from multiple lenders can help ensure that you find the lowest APR for your loan. 

Like any form of credit, there are pros and cons to an emergency loan. Funding is fast, and on-time payments can help boost your credit score. However, failure to meet your payment obligations can negatively impact your credit score. That is why it is crucial to carefully review the terms of your emergency loan so you are prepared to make repayment. 

401(k) loans

A 401(k) loan can be a solid alternative — if you are willing to sacrifice some retirement savings. You will need to agree to repay any funds you borrow from your account within five years in order to withdraw money from your 401(k) early.

With a 401(k) loan, you can avoid paying penalties that typically accompany an early withdrawal, and there is no credit check requirement. However, you lose out on potential tax-free earnings and may set your savings back. There are also restrictions in place that limit how much you can borrow, and some employers may not allow for early withdrawals due to their plan.  

Pay advance apps

There are also early payday apps that are as quick as other, more costly cash advance options. These apps offer a cheaper and, in some cases, a no-cost alternative to payday lending. Approval is based almost exclusively on your paycheck and how cash flows in and out of your bank account.

You may be able to access up to $750 of your paycheck early. However, you may need to wait three to five days to receive your funds or pay a fee to receive your funds instantly. There may also be a monthly subscription fee to use the service. Others ask for voluntary tips that are deducted from your paycheck when the advance is repaid.

Credit card cash advances

If you have a credit card, you may have access to a short-term cash advance option. You won’t have to open a new account and may even be able to access the cash at a local ATM.

Read the fine print on your credit card agreement, though. There is typically a 3 percent to 5 percent fee. Plus, cash advances usually come at a higher interest rate than regular purchases. Interest starts accumulating immediately rather than after a grace period.

Buy now, pay later apps

If you need to buy something important between paychecks, a buy now, pay later (BNPL) service may help you spread the payment out and avoid turning to a payday loan to make ends meet. Some options may charge interest or other fees.

A recent Bankrate BNPL survey showed over a third of U.S. adults (39 percent) have used at least one of these services. BNPL loans may be a good alternative if you need to make a necessary purchase online and want to avoid high-cost payday loans or other cash advance options.

Bottom line

When faced with financial struggles and the need for quick cash, many turn to online cash advances, also known as payday loans. The high cost of fees and quick repayment terms can lead to a cycle of debt. 

Cash advance options such as payday loan alternatives, early payday apps, credit card cash advances and buy-now-pay-later plans can offer more affordable options to get you the cash you need without risking your financial stability.