Payday loans have some similarities when compared to cash advance loans, but also many important differences. As a result, it is very important that you understand the implications of each option and others before jumping in.

Payday Loans

Payday cash advance loans are a form of short-term financing. They are available in-person and online.

Generally, lenders grant you credit based on your income. These loans are usually for amount of $500 or less, depending on your state. Some do not require a credit check.

Still, you have to repay your loan quickly, usually within weeks, not months or years. Many lenders also insist that you provide them with banking information for automatic repayment.

While lenders may issue payday loans to almost anyone with a source of income, these loans can come with steep interest rates. According to the Consumer Financial Protection Bureau, the average annual percentage rate (APR) is almost 400 percent.

Even though it is generally easy to access quick cash through cash advance payday loans, they have the potential to create a debt cycle. Plus, if you can’t meet your repayment obligations it can trigger steep additional fees.

In some cases, you may be able to roll over the balance of your payday loan into a new loan. While this may seem helpful, consider that you have to repay the higher amount. If you couldn’t pay the original loan, you’ll probably struggle to repay an even higher one.

Do Payday Loans Affect My Credit?

It depends on the lender and what type of inquiry they do. A soft inquiry does not lower your credit score, while a hard one does.

Even if the lender does not run a credit check, if you don’t repay your loan it will end up in collections. This definitely affects your credit score.

These loans aren’t usually reported to the credit reporting agencies either. In other words, they aren’t your best choice if you want to boost your credit score.

Can You Repay a Payday Loan Early?

Probably, but you may need to make arrangements if you want to make a partial payment. However, this usually isn’t even an issue, since most cash advance payday loans are repaid on your next payday.

Still if you come into a windfall, you can usually pay it off early. Just be sure to get a receipt and get back the debit form you signed. Otherwise, the money will come out of your account even though you paid.

Cash Advance Loans

Cash advance loans are available through a credit card or a cash advance app. Technically, they are short-term loans, but they’re also quite different.

Credit Card Cash Advance Loans

Borrowing against a credit card triggers interest charges from the moment you borrow. There’s no grace period that you can use to pay with 28 days without interest, like you can when you charge things on your credit card. You’re also charged interest at a higher rate than your usual credit card purchases.

At this time, average credit card interest rates range between 12.99% and 20.99%. However, cash advance rates are much higher. Typically, they range between 22.99% to 27.99%. Your credit card agreement outlines the precise percentage rate as well as your cash advance limit. This limit is usually much less than your credit card, so don’t presume you max out your credit card if you need quick cash.

Most credit card companies also charge you a fee when you get a cash advance loan. Fees typically range from 3% to 5% of the amount you borrow.

Cash Advance Loans Through Apps

Cash advance loans through apps give you access to money you earn instead of borrowing against a line of credit. The obvious advantage of this method is that you’re not paying multiple payments or creating long-term debt.

Still, users should consider that the money usually comes off their next paycheck. If you’re not great at managing your finances, you make forget about the automatic repayment and struggle to pay your expenses or even miss payments.

The attraction of this process is that it is relatively simple. You download the app, connect your bank account, and provide employment information so the platform can verify your income.

After verification, you are free to get an advance on your earnings. Many apps do not involve a credit check, which makes these apps very attractive for those with poor or no credit.

While some platforms state their cash advance loans are interest-free, you still pay in some way. Some platforms operate on a subscription basis, others charge flat fees, and still others suggest you leave a tip. However, you may enjoy perks with some platforms such as financial tools or cashback on purchases.

Loans are usually small, with most having a maximum of between $250 and $750. Plus, you must share your financial information with an unknown company, which can be risky.

The following are some of the most popular cash advance apps if you want to check out what they offer.

Brigit

Brigit’s maximum cash advance loans are $250 and they charge a subscription for their premium offering. The benefits of premium are no credit check, no late fees, and free extensions on repayment.

Chime

Chime also offers cash advances. Borrow up to $500 without interest charges, mandatory fees, or a credit check.

You must have a Chime bank account to access this service, but once you set it up cash advance funds can be released as quickly as within one day. However, you pay for this privilege. If you’re willing to wait 1 to 3 days the service is free.

Dave

Dave lets you get a cash advance loan if you set up a checking account with them. Download the Dave app, link it to your bank, and get a cash advance of up to $500.

They’ll charge you a small fee to transfer your advance to your Dave Checking account instantly or to a different debit card within an hour. The amount you borrow is deducted from your bank account on your next payday. They don’t charge interest or late fees.

EarnIn

EarnIn allows you to borrow up to $150/day, with a max of $750 per pay period if you qualify. However, it takes between 1 and 3 business days to get your money, unless you pay a $4.99 fee. If you do, you can get your money in minutes.

Once again, the lender automatically deducts what you borrow on your next payday. They also provide your VantageScore 3.0® by Experian if you want to track your credit score.

Empower

Empower provide cash advance loans of between $10 and $300 with instant delivery available for $3. The app operates on a auto-recurring $8/month subscription fee. There are no credit checks or late fees.

Do Cash Advance Loans Affect My Credit?

If you use a cash advance app, it will not affect your credit since the loan isn’t reported to the credit bureaus. This also means that these types of loans can’t help you build credit.

If you use a credit card for a cash advance, it doesn’t affect your credit directly. However, it does increase your credit card balance and your credit utilization ratio. That ratio measures the percentage you’re using of your available credit. If it goes above 30%, that’s an issue. If you take out multiple large cash advance loans, it can also lead to a credit score drop.

If taking cash advance loans makes it harder for you to stay on top of your bills, that’s an obvious problem too. This could lead to late payments that affect the most important factor of your credit score, your credit history.

Can You Repay a Cash Advance Loan Early?

Yes, you can usually pay off a cash advance through an app or on your credit card whenever you want. However, some lenders do charge prepayment penalties if you repay early. Always check before you borrow.

Are There Better Alternatives Than Payday Loans and Cash Advance Loans?

Absolutely, particularly if you need more money than what these options offer. A personal installment loan is often a better choice since you can decide how long you want to take to repay which also controls the payment amount.

A good personal installment loan can also offer lower interest rates and without fees. Most loans are also ‘open’ so you can pay more whenever you want. Obviously, this makes personal installment loans very flexible.

Personal loans are also reported to the credit bureaus making them a great way to strengthen your credit. Luckily, many lenders offer installments loans to those with little or no credit, alternative income sources, and even a less than ideal credit score.

Find Your Best Options Through FlexMoney

FlexMoney USA is your go-to resource for online lending. You can explore options for quick cash, without hassle to find flexible lending solutions in minutes.

If you’re still set on payday loans or cash advance loans, you might want to see how installment loans compare. You may be surprised to discover they offer convenience, speed, flexibility, and better value than these other options.

Complete one application form and you’ll tap into our extensive network of reputable lenders. We’ll immediately show you what’s available to you with lenders offering personal loans of between $200 and $35,000, quickly and easily.

Apply for cash advances today and you can compare interest rates and terms within minutes.