It is a well known fact that cash advances are short terms loans that you can avail in the event of a sudden financial crunch. This is the cash that you can avail and one that will be charged against the credit card that you are using.
It is more or less similar to the manner in which you use your debit card. However unlike your debit card where you use the money that is already present in your bank account, in case of cash advances, the same will be made available by the credit card companies or the company that has agreed to extend the loan to you. The amount you are entitled to, is usually a certain percentage of the credit limit that you have been allotted.
Abide by terms and conditions
As far as signing the contract between the creditor and the debtor is concerned, there are several terms and conditions that you ought to abide by prior to signing on the dotted line. Since you are using your credit card to obtain the cash advance or the so called short term loan, you will have to shell out a certain amount as fee aside from the fee that you pay for using the teller machine to withdraw the cash.
Rate of interest
It is a well known fact that credit cards are used to make a wide range of purchases and the only difference between using the credit card for making such purchases and cash advance is the interest rate. However, when it comes to rates of interest, it is higher in case of cash advances that you avail against your credit card.
Effect of short term loans on credit report
Generally speaking, whenever you avail a loan of any kind, the same gets reflected in your so called financial report card known as the credit report. However, interestingly, when you avail cash advance against a credit card, the same is not reflected in your credit report. And your credit report will not show that you have taken out a cash advance or will not impact your credit score directly. That does not necessarily mean that your credit report will be left unscathed.
The only inconvenience that might arise in the event you are not able to make the repayment within the stipulated period of time is owing to the fact that these types of loans usually attract a very high rate of interest. This can cause the outstanding balance on your loan account to grow by leaps and bounds.
Under such circumstances, if you are not able to keep pace with the increasing outstanding debt amount, it negatively impacts your credit report.
As such, when you take out cash advances against your credit card, you have to be careful that the balance amount should in no way spiral out of your control.
If you are not confident about these loans, there are other types of short term loans or cashfloat loans that you can avail. There are payday loans and personal loans to choose from. However, no matter which loan advance you avail, making the repayment on time is surely one criterion that can help you to keep your credit report clean. After all, making payment on time indicates how financially responsible you are and the same gets recorded in your credit report.
Beware of scam artists
The fact that many such loan extending companies operate in the market makes every individual even more vulnerable to fraudsters. As such, when you intend to avail short term loans, it is essential that you carry out due diligence and do your homework before you take the plunge. Alternatively, you could also ask for referrals or your peers that have already availed such services.
