Have you ever been in a financial pinch? Most of us have, and you probably know how difficult it can be to get out of it when you need money fast. There are solutions to this extremely common problem, and they are payday loans and cash advances. These financing solutions are meant to help you out when you need a short-term loan, so let’s answer some of the questions you may have regarding them.

Cash Advances FAQ

What are cash advances?

A cash advance acts as a short-term loan, but it’s not a loan, it’s an advance. A cash advance is typically used by businesses, and it enables you to get a type of secured cash loan that does not require an asset. Instead, the money is given based on credit card turnover. That is, how much you make from sales paid on credit cards. Being able to afford repayment will never be a problem, because the repayment is made based on a certain percentage of whatever you make.

Who is eligible?

A cash advance is meant for small business (or even medium ones) that have been in operation for a minimum of 6 months. In order to be eligible for this kind of financing, your business must have a lot of credit card or debit card transactions. That is because of the way the repayment method is structured, which we will talk about in a minute. You also need to present statements going back about a year, and of course, the assorted bank information and ID.

How much can you borrow?

The amount you can get is based on the amount your business makes on a monthly basis from credit card transactions. If you’ve got sales, your credit score will count less, so you will be able to borrow a higher amount.

How do you repay?

Repayment is made in a bit of a different way, by paying a fixed percentage out of your weekly or daily card sales. That means that you will always be able to afford your repayment; if you sell more, you pay more, and if you sell less, then the repayment will also be smaller.

What about fees?

One of the best things about this type of financing is that there is no interest to worry about. But there is a fee that you need to pay to the lender, that will be agreed upon before signing the contract. Because this is not a traditional loan, your fees won’t grow the longer you take to repay, like interest does.

Payday Loans FAQ

What are payday loans?

Payday loans are another type of advance, as you get the money now, to pay it later on your next payday, hence the name payday loan. The loan is typically small, but issued quickly, and it is given on a short-term basis. Originally, the loan was meant to be repaid on the next payday, so within a fortnight or one month. Now, however, the concept of a payday loan has evolved to essentially mean short-term loan and you can repay within 1 month, 3 months, 6 months, etc. depending on the lender. Be advised that these loans come with a high interest rate.

Who is eligible?

It doesn’t take much to be eligible for a payday loan. All you need is:

How much can you borrow?

The amount you can borrow depends on the lender. Usually, it’s based on the amount you earn, so the more you make, the more you can borrow. A poor credit history can impact that negatively, though.

How do you repay?

You repay the loan on the date you agreed upon, whether that’s within one month or three, or just on your next payday. You pay the full amount you borrowed, as well as any interest charge you will have incurred.

What about fees?

The interest rate for payday loans is 0.8% per day. Interest will be higher the longer you take to repay back your loan. So, a loan that you repay within a week will have a much lower interest charge than one you pay within one month, for example. If you skip repayments, fees will also apply.

There you have it – all your questions about payday loans and cash advances answered! Now you have the knowledge to make an informed decision between the two.