Money is a sober requirement for everyone in this world. Surely the need for money is increasing day by day with the rise of our demand. There are various ways to earn money but more ways to borrow it. The banks and the financial institutions, as well as personal lenders, are eager to end their money for a term with higher interest rates. Many people are skeptical about borrowing a loan from the financial institutions in the fear of large interest rates levied on the principal amount. Well, it is true that the interest rates are higher but you are also getting the cash loans as instantaneously as possible. So, we have done a literature survey on the subject and found out that borrowing is still a better option. Through this article, we intend to make you acquire knowledge about the benefits, how you can apply for cash loans, and the repayment process.
Cash advance overview
A cash loan or advance is a defined system that allows you to make use of your credit cards to withdraw a short-term loan at a bank or an ATM. Every bank is now providing the account holders with this facility and this sort of loan is gaining high momentum in the present day. The features are quite different from that of withdrawal from your account. When you withdraw cash from your account, you are debiting from your account balance which does not repayment as it is your money. However, cash loans are different. When you are using a credit card, the bank is assuring you with some money which needs to be paid back within a term. Many might find the idea deluding as the conventional card system only allowed digital payments at Point-of-Sale. But, it is very much true that you can now take out a sum of money from ATM and repay it with interests according to bank policy.
There are many benefits associated with it but one must be concerned about the over usage of such facility as it may result in you paying back almost as double than you withdrew. If you are unable to repay, your credit score will fall down which will affect your portfolio during future commitments. Anyways, we will be discussing the concern later on.
The first and foremost benefit of having cash loans facilities is that you can withdraw cash. Liquid money is always appreciated. There may be times when you run out of money in your pocket and confront with cash-only situations. This is most common when you are purchasing something from a street vendor. You will need paper money and your salary hasn’t yet been credited to your account. Now, you cannot ask for money from strangers and you cannot call your known ones to retrieve you from that situation. But, if you hold on to a credit card, you can definitely have the facility of borrowing cash from the bank itself and get paper money from any ATM. However, the banks are also concerned about the uses. So, they most likely cap the cash withdrawal to 8-10% of the total ceiling limit.
Cash loans are expensive deals
It is easy and convenient to withdraw cash from ATMs as a cash loan but analysts find it one of the costliest ways due to the following expenses lurking behind cash loans.
- Cash Advance fees are imposed by the issuer of your card. It can either be a bank or any financial institution. According to their terms and policies, some cards pay a flat fee per cash advance whereas some charge variable fees. The variable fees constitute the percentage of the amount that is advanced. Some banks also prefer to impose a hybrid system where a percentage of minimum amounts are levied.
- An ATM or bank fee is another component of the expense that has to be borne by the customer. It is imposed by the institutions which look after the transaction and handle it.
- The interests on credit card cash advances are often higher than the rates on purchases which make it difficult for the bearer to actually repay. Since there is no grace period, the interest starts accruing immediately after the withdrawal.
So, having cash loans look to be simple, easy, and convenient but the charges associated with them are humongous leading you to eventually burn a large hole in your pocket. Moreover, it is advisable for you to withdraw cash advances from ATMs only when you are in a severe cash crunch and you know you can pay the debt with your stable income after it is credited.