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Cash Advances and Payday Loans: Comparison and Contrast
When people search on the web to find a solution to their short-term financial shortfalls, the terms "payday loan" and "cash advance" are often thrown around together willy nilly. To phrase that a little more clearly: When people need money fast -- to cover critical expenses like rent, mortgage payments, auto loans, or credit card minimum payments -- they'll often go searching for a payday loan or cash advance. Is there a difference between the two terms, or are we talking about much the same thing? The answer is: It depends.
Differences
If you take a cash advance on your credit card -- using your pin number to obtain money from your card's revolving credit line -- that's known as a cash advance. This differs from a payday loan in that you are, by virtue of your credit line, approved to receive the cash. There is no application process to go through -- all you have to do is visit an automatic teller machine. However, a credit card cash advance is similar to a payday loan in that the rate of interest will usually be higher than your credit card's standard annual percentage rate (APR). This means you should treat a credit card cash advance much like a payday loan: You will look to repay the debt as soon as possible to avoid the interest charges inherent in such a transaction. Generally, it's a good idea to take a cash advance -- if you must -- on a credit card that has a zero balance. Then you can be assured that the full amount of your payment will be applied to the higher-interest cash advance and not to lower-interest, regular, revolving debt. Remember: This is not cash from your bank account and this money has a direct and tangible cost to you.
Similarities
The terms payday loan and cash advance can mean the same thing when you apply online for a short term money infusion to cover your expenses until your next paycheck. If the line of credit you'll be receiving is a new one, it will require an application -- usually detailing your contact information, your monthly salary, and your bank account info. This is perfectly standard for such a transaction. Remember: there should never be an application fee for either a cash advance or payday loan transaction. Fees should only be charged after the loan is approved and your money is deposited in your bank account. Whether you're searching for a cash advance or a payday loan, remember that you are looking for basically the same thing. What you seek is immediate help for your expenses, which you will pay back as soon as possible due to the higher interest rate of such a loan. Be sure to choose a reputable lender with a clearly stated privacy policy and terms of use document. Also be sure the site's security is solid, as compromising your private financial data can have disastrous consequences including complete identity theft. Always be sure to choose a cash advance or payday loan site that spells out its fees and interest rates in plain English. Otherwise, you might be searching in vain for a solution that will only cause you more problems.
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