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An emergency cash advance is any sort of advance of cash that can be given in a very short period of time, usually with little to no approval process, and with no collateral given. The situations that lead people to take out an emergency cash advance can vary widely, but usually it is because of some unforeseen circumstance or poor budgeting which led to a cash shortfall when cash is desperately needed. An emergency cash advance usually comes from one of two sources, either a banking institution, or a payday-loan style establishment set up just to give out advances.
For most people, an emergency cash advance is a last ditch effort to pay some important bill. It might be a medical bill, a rent check, or a credit card payment that is extremely delinquent. Whatever the situation, not paying the bill is not an option, and so any option available is usually looked at. As a result, the terms of an emergency cash advance are usually very unfavorable to the borrower. For this reason, if taking out an emergency cash advance can be avoided, it is usually recommended. Dipping into a savings fund, borrowing from family, or simply coming in late on paying the bill may all be better options, depending on the specific circumstances of the borrower.
If taking out an emergency cash advance is absolutely the only option, the first thing that should be looked at is borrowing money from a banking institution. Credit card companies often have an emergency cash advance option on the card, where cash can simply be withdrawn against the credit limit. Although the interest charged on these advances is usually considerably higher than on normal purchases, it is nearly always still quite a bit less than a non-banking funded emergency cash advance. Alternately, many banks may be willing to extend a personal line of unsecured credit, or a one-time loan. The downside to this option is that there is a chance of rejection, and the funds may take some time to be released.
If banking options don’t work out, then an actual emergency cash advance, usually called a payday loan, may be pursued instead. A payday loan is issued by a lender that is not a bank, although it is still regulated by different laws. Various states and jurisdictions in the United States have different laws regarding payday loans, including limitations on the interest that can be charged, and some municipalities do not allow payday lenders at all.
A payday emergency cash advance is a very short-term loan, usually lasting less than two weeks. A flat charge is usually issued for each bracket of money lent. For example, a payday lender might charge a $15 US Dollar (USD) fee for each $100 USD borrowed. So if a borrower were to borrow $500 USD for a two week period, at the end of that two weeks they would owe $575 USD. That is equivalent to an APR of around 390%, which, when compared with even extremely high credit card APRs of around 29% is still an order of magnitude greater. For this reason, payday loans are almost always a last resort for people, but if it comes down to it, they can be a lifesaver.