Payday Loans vs Early Payday Apps
If you’re in a position where you’re facing an unexpected financial emergency, you may be wondering which is better: a payday loan through a payday lender or an app-based cash advance service. This article will provide information on the pros and cons of each to help you make an informed decision.
Payday loans and app-based cash advance loans are both ways to borrow money quickly against your upcoming paycheck when you have an urgent financial need today, but there are some notable differences in terms of the application process, lender fees, and terms and conditions.
Cash Advance Apps
Many cash advance apps market themselves as having better pricing and lower fees than traditional payday lenders. They tout voluntary payments and tips, but these can still come with a certain cost. App-based cash advance services, also known as earned-wage, early-wage, or payroll advances, are relatively new services that have emerged within the last decade, and aren’t typically associated with traditional payday lenders. They commonly advertise as offering “free” cash advance services, but ask users to provide a “tip” or a voluntary payment of anywhere between 5% and 15% of the loan amount.
To qualify for a cash advance through a typical payroll advance app, applicants must provide more personal information than what is required for a typical payday loan. For example, some apps require users to provide access to their checking accounts in order to assess pay history and other account activity. Some of these apps can even track the borrowers’ GPS data to ensure they are showing up to work every day. Upon payday or the day in which the loan amount is due, the app automatically deducts the amount from the borrower’s checking account. Many of these apps don’t charge interest or fees, but do collect voluntary tips. However, the word “tip” when it applies to a cash advance is different from the type of tip you’d pay your hair stylist for excellent service. Some apps have been known to limit the future loan amounts for borrowers who did not tip.
Payday loans emerged in the early 1990s, and are now known as a quick and easy way to get cash fast when an unexpected emergency arises. The application process is simple, and consumers with less-than-perfect credit can qualify. The applicant is usually required to provide valid identification, proof of a checking account in good standing, and proof of current employment. Lending fees average from $10 to $30 for every $100 borrowed, and as long as the loan is paid back in full in a short period of time, it can be an easy way to fund an urgent financial need.
Whether you decide to take out a payday loan from a traditional payday lender or choose to go with a cash-advance app, it’s always important to be familiar with all the terms, fees, and expectations. Carefully read the fine print and be sure you know how much you’re expected to pay back and when so you can avoid further financial troubles.