As the name implies, a paycheck advance loan (better know as a quick payday loan) is a way to borrow money until that person is paid by his/her employer. This means that it isn’t suitable for long-term borrowing or debt consolidation. Instead, it is intended as a means of dealing with a short-term financial emergency, such as paying the rent or a utility bill. It is a no credit check loan so it is suitable for individuals who have a low credit score due to a history of missed and/or late debt repayments.
Qualifying for a Paycheck Advance Loan
Unlike most bad credit unsecured loans, in order to qualify, it isn’t necessary to undergo credit scoring. Lenders will instead apply the following criteria:
- The applicant must be a U.S. citizen.
- At least 18 years of age.
- They must be in full-time employment.
- A valid checking account is required.
- Provide a minimum of two forms of identification – at least one must be photo ID.
The Cost of a Paycheck Cash Advance
A no credit check loan will carry a higher risk of default which will be reflected in the rate of interest the borrower is charged. Although rates will vary considerably between lenders, it typically costs $20 to $25 a month for every $100 borrowed. It is important to appreciate that, whilst a quick payday loan can help someone out of a short-term financial hole, it will leave less money for household bills the month after.
How Does a Paycheck Cash Advance Work?
A quick payday loan will be granted to an individual who is able to comply with the above lending criteria. Once approved, the borrower provides a postdated check which coincides with the date they are paid for the balance of the loan and any interest. Provided that the application is submitted before 2.30 PM, the money may reach the borrower’s account that day. If not, it will be with that person within 24 hours.
Pros and Cons of a Quick Payday Loan
A paycheck advance loan could provide someone who has a low credit score with the chance to borrow money for a genuine emergency. This could be invaluable as, once someone has poor credit, the banks are no longer interested in extending lines of unsecured credit. The problem with taking out a paycheck cash advance is that the higher incidence of default means that the rate of interest is extremely high. The temptation of easy money can result in impulse buying which will exacerbate the individual’s financial difficulties.