A cash advance refers to a form of short-term loan which is made available by a bank or an alternative lending house. This term also describes the service offered by many credit card issuers which allow cardholders to make withdrawals of a certain amount of cash. Although cash advances are generally attractive to borrowers because of their fast approval and quick funding feature, they come with steep interest rates and/or fees which, if not managed properly, can do more harm to your finance.

Types of cash advance in Alaska

Although cash advance in Alaska is available in different varieties, a denominator common to all of them is the high interest rates and fees.

1. Credit card cash advances:

Credit card cash advance is the most popular of all cash advance in Alaska. This is a form of advance that is made available via a credit card. Depending on the credit card company or Alaska loans online company, you can withdraw this money at an ATM or from a deposited check at the bank.

The downside to this form of cash advance is their very high-interest rate, which is even higher than the rate on regular purchases. This means you will have to pay an average of 24%, which is almost 9% higher than what is obtainable in an average APR for purchases.

Another downside to credit card cash advance in Alaska or Alaska loans online is that it doesn’t come with come with a grace period, which means that interest begins to accrue immediately. Aside from that, these advances usually come with some kind of fee which could either be a flat rate or a percentage of the amount offered by the lending institution.

If you were to access this cash via the ATM you will often be charged a usage fee.

Just like its separate interest rates, these advances also have a separate balance from credit purchases.

Compared to a few other types of cash advances that have no or low-interest introductory offers, such feature is not available in credit card advances. The main advantage of this line of credit is that it is quick and easy to access.

2. Merchant cash advance:

This is a form of credit or loan granted to companies or merchants by banks or alternative lending houses. This type of cash advance in Alaska is typically used by businesses that have a less-than-perfect credit score. The funds obtained from these advances can be used to finance their activities. These advances can be paid for with proceeds that the business acquires from the sales of its products or with future credit card receipts.

Lending houses do not consider the business credit score, rather loans are given out based on business creditworthiness. This is by considering its multiple data points, this includes the amount of money the merchant receives through its online accounts.

3. Payday loans:

When it comes to consumer lending, a cash advance is quite synonymous to payday loans. These loans can range between $50 to $1,000, and they are offered by special payday lenders. They come with high fees, i.e. about $15 for every $100 borrowed, or even more, with interest rate that can sometimes exceed 100%.

Similar to merchant loans, payday loans also takes less cognizance of the borrower’s credit score but places more emphasis on the size of the applicant’s paycheck and local state regulations when it wishes to determine the amount of loan to offer. Once loans have been approved, the cash is handed over to the borrower by the lender. In situations where the transaction is an Alaska loan online, an electronic deposit is made into the borrower’s savings or checking account by the lender.

These loans come with an extremely short term period, this means they are expected to be paid back when the borrower gets his/her next paycheck. This is unless he/she wishes to extend the loan and in this case, it comes with additional interest. Although it is unfortunate most payday loans (about 80% of them) get rolled over within 30 days of the previous loan. This is according to a 2016 study made available by the Consumer Financial Protection Bureau.

The process of obtaining a payday loan is more complex than securing a credit card advance, but it is still quick when you compare it with accessing loans from a commercial bank. You will be required to write a postdated check for the amount you wish to borrow including any additional fees, which would be made out to the lender if you wish to obtain a payday loan. The lender then goes ahead to make available the amount you applied for. He would have to wait until the next payday comes to cash the check you provided.

For the electronically inclined lenders (Alaska loans online), they instruct their borrowers to sign an agreement permitting automatic repayment from their bank accounts. Some of the information required by lenders from borrowers include personal identification and proof of income.

Popular lenders across Alaska

Payday loans can also be offered by employers to their employees. The employer offers an advance on paychecks as a form of service. Although the terms may vary, it usually does not come with interest or any kind of fees.

Although taking cash advance does not directly affect your credit score, it can affect it in an indirect way. When you take an advance it raises your outstanding balance, which would raise your credit utilization ratio. This ratio is what is used by credit scoring models to calculate the score. For example, if you owe $500 on a $1,500 limit card, your utilization ratio is 30%. If you were to take an advance of $300 on the same card, this would raise your outstanding balance to $800 with a credit utilization of above 53%. Utilization ratio of more than 40% can impact your credit score negatively.