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Loans in Australia

Cash Advance Loans: What Is It & How To Get One?

By December 6th, 2023No Comments

Key takeaways

  • Cash advance loans are perfect for people who need fast cash to cover unexpected expenses.
  • You can still apply for a cash advance even without a bank account. Your options may be limited and you will need to present proof of income to show that you can repay the loan amount.
  • You may still be approved for a cash advance even if you had a poor credit score.
  • Short-term loans like cash advance loans costs include a monthly fee of 4% and an establishment fee of 20% of the loaned money.

Unexpected expenses or bills (such as a car repair or boiler breakdown) can cause issues with cash flow. For some people, the cost might be more than they can afford or if they can afford it, leave them with little funds for the rest of the month. Taking out a short-term loan, such as a cash advance loan, is one way to find the money to help.

This article will give more details on cash advance loans and how they differ from other loan types, like personal loans.

What is a cash advance loan?

A cash advance is a short-term loan you can apply for through traditional banks or private lenders, in which you can borrow any amount between $100 and $2,000. The processing of cash advance loans can be quick and will only take a few minutes to complete. If approved, you can make repayments for up to two years or as little as 16 days, depending on how much you’re approved to borrow. You can choose between weekly, biweekly, or monthly repayment cycles.

Here are some of the reasons borrowers apply for a cash advance loan:

  • Medical or dental costs
  • Auto repair costs
  • Urgent travel
  • Rental bonds
  • Groceries
  • Car registration
  • Utility bills

How Do Cash Advance Loans Work?

Cash advance loans are short-term loans that enable borrowers to get a set amount of money upfront and repay it over time. These loans are typically repaid over 16 days to 2 years. These loans occasionally have high fees, which can make them challenging to repay in such a short time. However, they are advantageous for borrowers with poor credit because lenders do not place as much importance on credit ratings.

Cash advance loans are an excellent alternative when you need money for an unexpected expense. The funds can be transferred to your bank account within the same day if an application is approved. The time taken to receive the funds will depend on your lender and banking provider.

How much can a person borrow?

The cost of your cash advance will depend on how long it takes you to repay your loan and how much you borrow. Typically, you can borrow any amount between $100 to $2,000. These loans have two types of costs: establishment fees and monthly fees of 20% and 4%. At Friendly Finance, you can apply for up to $15,000.

How do you pay back a cash advance?

You can repay your cash advance loan between 16 days to 2 years, depending on how much you borrowed. Repayments are typically processed weekly, bimonthly, or monthly and deducted automatically from your bank account. The repayment schedule is outlined in your loan agreement, so carefully review it before you sign and make sure you can afford the repayment schedule.

How to apply for a cash advance loan

Applying for a cash advance loan is just like applying for any loan. Everything is done online and just takes a few minutes to complete. All you need to do is fill out the application form and select your loan amount.

You must fulfil the following criteria to be eligible for a loan:

  • At least 18 years old
  • A permanent citizen of Australia
  • Have a stable source of income with a minimum monthly salary of $800
  • A working phone number and email address
  • An active bank account

Remember that the eligibility for loan applicants will vary depending on the lender.

What information do you need to provide?

Information you need to provide will likely include:

  • A valid ID
  • Contact and residential information
  • Proof of employment or income
  • 90-days worth of bank statements

Are credit scores important?

Credit scores are not as important for short-term loans such as cash advance loans. You may be approved for a loan even if you have a bad credit score as long as you can prove that you have a regular source of income and can afford the repayments.

How long do I have to wait for an approval decision?

Borrowers will typically receive approval either the same day or the following business day. The funds will be sent after the loan agreement is signed and the time taken to receive the money will depend on your banking institution.

Differences between a personal loan and a cash advance

Both personal loans and cash advances have advantages and disadvantages, and each is best suited for particular situations. Here are a few of their key distinctions to assist you in deciding which loan to apply for.

Personal loan

  • Definition

Personal loans are a type of finance used to pay for life events such as weddings, vacations, home renovations, and even car repairs. This type of loan is typically taken by borrowers who need larger loan amounts that can be repaid over a long period of time, typically between 2 and 7 years.

  • How much money can you borrow?

Personal loans allow you to borrow anything from $2,001 to $15,000.

  • How to get personal loans?

When applying for personal loans, you need to:

  • Be at least 18 years old
  • A permanent Australian resident
  • Meet minimum income requirements
  • Have a regular income
  • Have a good credit rating
  • Access to a bank account
  • Can you get a personal loan with bad credit?

You may find it tough to pay back debts if you have a low credit score, which will also make it challenging for you to be authorised for a loan. However, some lenders still grant personal loans to people with bad credit if they are backed by collateral or secured against an asset they own such as a car or a house.

  • Approval time

Personal loan lenders will require you to submit a full application with supporting documents. On average, the pre-approval is provided within two business days. Money transfers can be made the same day if it’s an unsecured personal loan but may take longer for secured personal loans, or loans backed by an asset.

Cash Advance

  • Definition

Cash advance loans are a type of finance intended for people who require immediate access to funds to cover urgent expenses. These loans are repaid in a shorter time frame with usual costs including establishment fees and monthly fees.

  • How much money can you borrow?

You can borrow any amount between $100 to $2,000 with a cash advance loan.

  • How to get a cash advance?

To get a cash advance, you need to:

  • Be at least 18 years old
  • Be a permanent citizen of Australia
  • Have a stable source of income with a minimum monthly salary of $800
  • Have a working phone number and email address
  • Access to a bank account
  • Can you get a cash advance with bad credit?

Yes. Credit scores are not as important to lenders for short-term loans as they are more concerned with your current financial situation and your ability to repay the loan amount.

  • Approval time

Some lenders may release funds within 60 minutes after the loan approval and if you apply within business hours. The time taken to approve and release funds will depend on the lender and your banking institution.

What you need to know before getting a cash advance

1. Risks of cash advances

  • Your Credit Score Might Suffer. Cash advances like any other loans will hurt your credit score if you apply for a loan and fail to repay them on time.
  • You Could Go Into a Debt Cycle. You must settle your obligations on time because failing to do so may cause you to fall into a debt cycle.
  • You May End Up Paying More. High fees for short-term loans can cause borrowers an issue and may cause them to pay more. Most payday short-term lenders add on an establishment fee equal to 20% of the amount borrowed and a monthly fee of 4%.

2. What is the cost of a cash advance?

The Australian Securities and Investments Commission sets the maximum fees a responsible lender may demand.

The costs connected with these loans are as follows:

  • Establishment fee: a one-time establishment fee should not exceed 20% of the loan amount taken.
  • Monthly fee: The monthly repayment fees should not exceed 4% of the loan amount per month.

Other related fees include default charges, which can go as high as 200% of the borrowed amount, and the enforcement fees incurred by the credit provider to recover the amount you owe under your loan account.

3. Does a cash advance loan affect your credit score?

There is typically no negative impact on your credit score as long as you make timely repayments of your loan. There can be exceptions, though. For instance, having a short-term loan like a cash advance loan on your credit history might be seen negatively by other credit providers, perhaps because they consider these loan types as signs of financial distress. Remember that any loan application can temporarily lower your credit score because of the hard credit check, which usually occurs when you apply for new credit.

What can Cash Advances be used for?

You can use cash advances for a lot of things. This include:

  • Living expenses. You can use cash advances for living expenses, such as paying your rent and utilities, getting a security deposit for an apartment or house, or even taking out some cash for something fun like an afternoon at the movies with friends.
  • Emergency. You also have the option to use cash advances for unforeseen emergencies, like if you lose your job or are suddenly short on money.
  • Medical procedures. Cash advances can also be used to pay for a procedure like a consultation, surgery, or hospital stay.
  • Travel expenses. If you’re planning to take a vacation, you may want to consider using a cash advance as part of your funding strategy. You can use it to pay for travel-related expenses like hotel rooms, airfare, or car rentals.
  • Home Improvement. Cash advances are a great way to pay for home improvement. You can use it for a new roof and windows, new appliances, painting the inside of your house, installing a new garage door or adding more storage space to your home.
  • Debt consolidation. You can use a cash advance to get your finances in order if you have an outstanding bill you’re unable to pay. It’s especially helpful if you’re behind on bills or have a small amount of money coming in every month.
  • Child-related costs. If you have a child, you know how expensive it is to raise a child—and there are many other expenses along with the ones listed above that come with raising a child. And when it comes to these expenses, sometimes you don’t have enough money in an account to cover them all. But with a cash advance, you can get the money you need quickly and easily.

The Bottom Line

Consider whether you need the money soon and how you will use it. Remember that even though your credit score is not that important to lenders, they do conduct reviews of your personal information and financial history to determine if you are a good risk for one of their loans. The bottom line is simple: if a cash advance loan is used responsibly and paid on time, it’s a viable option for funding various expenses in emergencies or for everyday purchases.

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