Cash Advance Apps – What You Need to Know
How Direct Cash Advance Apps for Consumers Work
Direct cash advance apps allow users to obtain a cash advance, typically against an upcoming paycheck or direct deposit. The borrowed amount is automatically deducted from the app in one lump sum when it is due, which may be after your paycheck is deposited into your bank account. Examples of direct cash advance apps include Earnin, Brigit, MoneyLion, and others.
Direct Cash Advance Apps: Features and Fees
Direct cash advance apps for consumers provide an alternative to high-interest consumer loans, featuring low or no fees. When used correctly, they can help you avoid bank overdraft fees or provide quick cash to cover expenses until your next paycheck arrives. According to Martin Lynch, education director at Cambridge Credit Counseling Corp., some apps also offer innovative budgeting tools and low-interest loans to build credit and other options.
What to Watch Out For
Cash advance apps can be a greater risk for those living paycheck to paycheck, especially if you don’t read the fine print. Consumers should consider the following points:
Are the apps considered loans?
The nature of the apps’ advances affects what they can charge you in fees and the information you need to provide. Currently, it appears that the advances from the apps discussed in this article are not subject to payday loan requirements. However, the regulatory landscape is subject to change, and cash advance apps may need to make some adjustments in the future, such as disclosing interest rates associated with tips or subscriptions.
How to Avoid Relying on Cash Advance Apps
Financial experts recommend carefully reviewing your budget and improving your credit standing so that you can borrow at lower interest rates in the future or avoid borrowing altogether. It is also advised to create an emergency fund to prevent the need for more cash advances. In the event of a financial emergency, you can request a waiver of overdraft fees or seek a low-interest loan from the bank, contact friends and family for a loan, negotiate with your creditor or debt collector, or ask for assistance from a utility company or set up a payment plan.
Source: https://www.thebalancemoney.com/payday-advance-apps-what-you-need-to-know-5115147
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