Have you ever felt the pressure of bills piling up in the days before a paycheck? If you need money but haven’t been paid, it could be the right time to consider a paycheck advance.
A paycheck advance is a way to receive money early based on your upcoming earnings. These are a few ways you can hit payday before it’s actually payday:
- Paycheck advance - Think of this as money that you borrow from a future paycheck. While you haven't technically been paid out yet, your employer is willing to front you the money now based on the work you’ve already done toward future earnings. A paycheck advance typically won’t cost interest as it’s money you’ve already earned, but it does depend on your employer being willing to work with you.
- Cash advance loan - While an earned wage advance is limited to how much is in your paycheck, you can find cash advance loans that will loan you fast money ranging from several hundred to over a thousand dollars. The available maximum loan amount varies by state. Unlike getting a paycheck advance directly from your employer, these are loans that will have interest and fees associated with them.
- Line of credit - If you’ve found yourself in need of a small boost more than once, a line of credit might be the right choice for you. A line of credit offers similar flexibility to a credit card, where you have a set maximum line and you can withdraw cash up to that maximum value. With a line of credit, you only get charged interest on the money you withdraw when you need it.
Below are a few possible solutions to get you the money you need fast.
Talk to your employer
An honest conversation with your employer is the first place to start. Even if your company doesn't offer a formal paycheck advance program, they may be able to provide some assistance or offer extra hours, assuming you have a good relationship.
If your employer offers a program, you may be able to borrow from an upcoming payday at low or no interest. The advantage of going through your employer is they can likely deduct repayments from future paychecks, which saves you worrying about the details. The disadvantage of going through your employer is if you have a challenging relationship or find yourself in need of a paycheck advance regularly, as repeatedly asking for this type of favor may further strain any tensions.
Consider a loan that best meets your needs
Two types of loans that can help people who find themselves in a crunch are cash advance loans and lines of credit.
A cash advance loan is similar to an earned wage advance but typically has an associated interest rate and can be for more money. Some companies offer cash advances online as well. Cash advance loans are designed to work similarly to a paycheck advance, so they offer immediate financing with the expectation that the loan will be repaid after your next paycheck.
A line of credit is slightly different, offering a flexible loan when emergency cash needs arise. With a line of credit, borrowers have a maximum limit and they can withdraw money up to that limit when they need it. Interest only begins accruing when the money is withdrawn, and only for the amount taken out. In that way, it works similarly to a credit card, but with the flexibility of cash. This can be a good option if you find yourself needing a paycheck advance more than once.
As with all loans, be sure to look at loan requirements, interest rates, and fees before signing on the dotted line. Most companies also require repayment on your next payday, so be aware of the due date before you borrow, and be sure to make any necessary cuts to expenses in the following weeks in order to pay back your loan in full.
The bottom line: Should you rely on paycheck advances?
While a paycheck advance can be an excellent way to stabilize your finances in the short term, they shouldn't be a lasting solution. You'll want to utilize any tools provided by your employer or cash advance loan provider to begin to get your financial house in order. That way, you'll be able to cover an unexpected expense on your own the next time around.
Notice: Information provided in this article is for informational purposes only. Consult your attorney or financial advisor about your current financial circumstances.
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Original Source: What is a Paycheck Advance and How to Get One?