Unexpected bills have a way of appearing at the most inopportune times. Whether it’s an expensive car repair or a medical bill, you might wind up needing extra cash.
Some people may turn to check advances for quick access to funds.
It’s important to keep in mind that while check advances can be helpful for quick cash, they have the potential to become a debt trap. What starts as a simple solution can, unfortunately, turn into a cycle of borrowing.
Let’s explore how check advances work, and cover everything you need to know so that you can make the best decision for you.
Understanding Check Advances
So, what exactly are check advances? Simply put, they are a way to get cash now using a future-dated check. Think of it like this: you write a personal check, but you post-date it for your next payday. You get the money you need now, but your check is held until that future date. When the due date comes, the check is cashed.
The Appeal of Check Advances
It’s all too easy to wind up in situations where we need money before payday. When this happens, a check advance can seem like a workable solution. In some cases, a small, short-term cash advance can prevent bigger problems that would cost even more money. A check advance can also help bridge short-term cash flow gaps. Suppose you have a bill due on Friday, but you don’t get paid until Monday. A check advance can help you cover that bill on time, preventing late fees or other penalties. They can be a last resort if no other options exist.
Benefits Beyond Immediate Cash
Check advances offer a way to get cash without a credit card or a bank loan. The biggest advantage of a check advance is speed. You get money fast. Applying for a bank loan or line of credit takes much longer.
Are Check Advances Debt Traps? Here Are the Risks
Payday check advances involve fees, which can add up quickly and hide their true expense. If the money is not paid back on time, people may opt to ”rollover” or renew their advance. This means paying another fee to extend the due date. Each rollover can add more fees, making your debt grow. Do that often enough and you might owe more in fees than the original amount you borrowed.
Let’s suppose you needed $200 for a car repair. You take a check advance with a $30 fee, due in two weeks. The two weeks go by, and you find yourself unable to pay the money back, so you roll it over, paying another $30 fee. Two weeks later, you are in the same position, so you roll it over again and find yourself being charged another $30 fee. In just six weeks, you are paying $90 in fees and still owe the original $200, creating a cycle of debt.
Potential Consequences of Default
Sometimes, checks bounce. If your post-dated check bounces when the lender tries to cash it, you’ll face penalties. If your check bounces, your bank may charge you an insufficient funds fee, and the check advance company may also add fees. Pretty soon, you could wind up owing more than you borrowed.
If the check advance is not repaid, the company can also send your debt to collection agencies. Failure to pay could potentially also hurt your credit score, making it harder to get loans or credit in the future. In some cases, companies might even take legal action to recover their money.
The bottom line is that getting stuck in a debt cycle can damage your financial future. It can make it hard to get a car loan or a mortgage. Even finding a place to rent can be tough if your credit is bad. This one quick fix can end up hurting you for years to come.
Another Way To Get Cash Fast
Before turning to check advances, try exploring other options. You might consider an installment loan, which is paid back over time, easing the immediate financial burden of having to repay your loan all at once. Be sure to consider how it will impact your budget. With repayments spread out over time, there’s a good chance you’ll be able to manage your other bills and stick to your budget while also repaying the loan.
Check Advance vs Online Installment Loan
Check advances are short-term, high-cost loans that must be paid back in one lump sum. An online installment loan may offer larger loan amounts with longer repayment terms.
Consider MaxLend for an Installment Loan
MaxLend offers quick-cash online installment loans of up to $3,750. It only takes a few minutes to apply online with our user-friendly loan application. You typically find out right away if you’re approved. We also have free Same Day Funding.* Borrowers who meet eligibility criteria and whose banks participate may even be able to get their cash within two hours of finalizing their loan, with Real Time Funding.
At MaxLend, we’re here to help. If you have questions, check out our FAQs page or contact us. Or simply apply online and you could see cash in the bank as soon as today.*
*Same Day Funding is available on business days where pre-approval, eSignature of the loan agreement and completion of the confirmation call, if a call is required, have occurred by 11:45 a.m. Eastern Time and a customer elects ACH as payment method. Customers who complete this process by 1:30 p.m. Eastern on business days may still receive funds on the same day, but some banks may not disburse the funds until the next business day. Other restrictions may apply. Certain financial institutions do not support same day funded transactions. When Same Day Funding is not available, funding will occur the next business day.