Online cash advances: What they are plus alternatives

Key takeaways

• The most common type of online cash advances is a payday loan, which comes with high costs and APRs that must be paid by your next paycheck.

• Alternatives to cash advances, such as payday loan alternatives, early payday apps, credit card cash advances, and buy now, paylater plans, may offer more affordable options for obtaining funds.

• Before resorting to an online cash advance, it's crucial to have a plan in place for repaying the funds to avoid falling into a cycle of debt.

Whether your account is running low or your credit cards are maxed out, an online cash advance could be a convenient option to quickly secure funds.

Still, there are significant drawbacks to consider. These loans are costly and come with brief repayment periods that can lead to a vicious cycle of debt. They should only be used as a last resort. Instead, consider more affordable alternatives.

How a cash advance works

Online cash advances are small, short-term personal loans or apps that allow you to get a portion of your paycheck early. Most online cash advances are payday loans because the entire balance plus fees must be repaid by your next pay period.

Borrowers choose online cash advances because they can get a small amount of cash quickly with no credit check. However, annual percentage rates (APRs) can exceed 600 percent, making this a risky and expensive way to borrow.

In most cases, an online cash advance product works as follows:

1. Fill out an online application: Verify your name, address, date of birth and Social Security number.

2. Provide employment and income information: This is the most important factor for getting a cash advance loan. Since credit isn’t considered, how often and how much you get paid will determine how much you’re approved for.

3. Allow the cash advance company to access your bank information: Lenders will typically use this information to verify your payroll direct deposit for the past couple of months.

4. Review the terms: Payday lenders must provide you with a detailed breakdown of how much you’ll pay, how long you’ll pay it and any fees required.

5. Repay the cash advance: Most cash advance companies automatically deduct the amount you’re advanced from your next paycheck. Payday lenders may allow you to roll over or extend your repayment date.

Bankrate tip

Many payday consumers get into trouble with payday loans because they keep extending them if they can’t repay the full amount by their next paycheck. Consider a loan from a relative or a part-time side hustle like Uber or Lyft that pays out daily so you don’t stay in the payday loan cycle.

Alternatives to a cash advance payday loan

A bad credit personal loan can provide lower rates and a longer repayment term than a cash advance payday loan. If you don’t qualify, financial technology companies now offer online cash advance products that are much cheaper than payday loans.

You may also have access to a cash advance on your credit card or the ability to use a buy-now-pay-later plan.

Payday loan alternatives

These loans may be advertised as payday loan alternatives because they offer repayment terms of several months or even years but still allow you to qualify with little more than proof of income. They can be funded as quickly as payday loans in most cases.

However, they aren’t cheap. Most charge triple-digit APRs, much higher than other emergency loan options. Some require biweekly payments, which can squeeze your budget if you’re already struggling to cover expenses between paychecks.

Check out the table below for the terms offered by payday loan alternative lenders reviewed by Bankrate’s expert editorial team.

Early payday apps

The early payday app is a new variation on online cash advances. These apps offer a cheaper and in some cases, no-cost alternative to payday lending. Approval is based almost exclusively on your paycheck and how cash flows in and out of your bank account.

You may be able to access up to $750 of your paycheck early. However, you may need to wait three to five days to receive your funds or pay a fee to receive your funds instantly.

Many companies charge a monthly subscription fee to use the service. Others ask for voluntary tips that are deducted from your paycheck when the advance is repaid.

Credit card cash advance

If you have a credit card, see if you can get a cash advance. Most credit cards offer a short-term cash advance option. You won’t have to open a new account and may even be able to access the cash at a local ATM.

Read the fine print on your credit card agreement, though. There is typically a 3 percent to 5 percent fee. Plus, cash advances usually come at a higher interest rate than regular purchases. Interest starts accumulating immediately rather than after a grace period.

Buy now, pay later plans

If you need to buy something important in between paychecks, a buy now, pay later (BNPL) plan may help you spread the payment out. This may allow you to avoid turning to a payday loan to make ends meet. Some options may charge interest or other fees.

For example, if you have an unexpected car repair or an empty fridge, a buy-now, pay-later option could let you fix the car or stock your shelves. You then have four to six weeks to pay off the cost. Failing to pay could hurt your credit score.

A recent Bankrate BNPL survey showed over a third of U.S. adults (39 percent) have used at least one of these services. A BNPL plan may be a good option if you’re one of the 14 percent of Americans who were denied a new credit card they applied for between March 2022 and March 2024, a separate Bankrate survey found.

The bottom line

When faced with financial struggles and the need for quick cash, many turn to online cash advances, also known as payday loans. The high costs of APRs and quick repayment terms can lead to a cycle of debt.

Cash advance alternatives such as payday loan alternatives, early payday apps, credit card cash advances and buy-now-pay-later plans can offer more affordable options.