Cash advance apps can be a short-term bridge for cash-strapped people
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According to a 2017 study by Career Builder, about 78% of Americans found themselves living paycheck to paycheck. It’s perhaps no coincidence that cash advance apps, which let people access their cash before payday, have become a hot trend in recent years.
These apps allow users to temporarily borrow the money they need to bridge the gap until the bill money arrives or on payday, at a cheaper cost than overdraft fees and missed payment penalties from banks. In this regard, many startup entrepreneurs and employees find these apps really useful.
For example, I recently heard of a startup team building a business that gets paid on the performance of their work, so their accounts payable are late every month, and they depend on these apps to provide them money until their customers charge to reconcile. Learning more about this team and how they use cash apps for creative funding gave me the inspiration to write the article and share more apps that can help more startups.
A downside of using cash advance apps is that they can potentially encourage bad money habits. For example, some users may rely too often on early access to their money and end up with very little in the bank when the money arrives.
Here is a short list of a handful of apps that can be used to meet your cash needs.
What sets PockBox apart from many others is that users can borrow up to $2,500, which is up to 10 times more than the amount typically offered by cash advance apps. PockBox works as a connection to multiple lenders, which can increase the chances of being approved. Users can apply even if they have bad credit, and if approved, they will usually receive their money the next business day. Interest rates vary by lender.
Float is a new app that offers 24/7 bank account monitoring and sends a variety of alerts to help users keep track of their balance more easily. Float also offers a high loan amount of up to $2,000 and is connected to multiple lenders, which can increase the likelihood of being approved.
The Dave app is the first app of its kind, created to help Americans avoid ridiculous overdraft penalties. Dave allows users to borrow up to $75 at a time in exchange for a subscription fee of $1 per month. No credit check is performed. No interest is charged, but users are “kindly” encouraged to tip. The loan is simply repaid on payday. The Dave app has such handy features as alerting the user when their bank balance is low, and it also helps them plan their future expenses.
With Earnin, it’s possible to get paid earlier (up to $100 per day) for hours already worked – and it’s completely free to use. Workers are encouraged to tip if they can afford it, but it is not required. The warning ? Users must receive wages on a regular basis by direct deposit into a checking account and also have an online timekeeping system at work or a fixed workplace.
MoneyLion Plus App
Users can download the MoneyLion app and sign up for the Plus service to get access to a $500 loan with a low APR of 5.99% whenever they need it. The Plus service costs $19.99 per month, but this fee is waived provided the user logs into the app every day.
To be eligible for MoneyLion Plus, users must verify their identity, have a consistent source of income, have a bank account that has been open for more than 45 days, and they must be able to show a positive bank balance. Credit ratings are considered, but a good rating is not required.
The Brigit app costs $9.99 per month and gives users instant access to $250. Additional features include the ability to set up automated advances, free instant transfers, and free extensions for those who need a little extra time to pay back what they’ve borrowed. Brigit does not consider credit scores as part of its qualification criteria, but users must have a bank account and recurring income from a single source.
Are these early paycheck applications appropriate for larger loans?
In short, no. Low-cost personal loans are the avenue to explore for larger borrowings, as opposed to the short-term loan solution offered by cash advance apps. LendingClub or Prosper are examples of lenders that offer longer loan terms and better terms for this type of loan – but they are not suitable for providing access to money in a flash.
Cash advance applications and responsible use
First paycheck apps and apps like Dave can be a useful temporary solution to help entrepreneurs and start-up employees avoid unpaid bills, operational expenses, and even dirty little overdraft fees. However, it should not be relied upon on a regular basis, as transfer/subscription fees can accumulate over time and leave users even more out of pocket. Think of these tools as a rich uncle who can help you in a bind. You can get a loan once in a while, but you don’t want to depend on it every month.
Moreover, frequent use of these services can lead to a vicious circle of dependency, especially for low-income people in poor areas or for anyone building a startup. Entrepreneurs who often rely on constant borrowing will undoubtedly find it difficult to develop good financial habits, such as building up savings, as they will be trapped in the bill-to-bill and paycheck-to-cheque life. long-term payroll.
The Bottom Line: Like all types of loan products, cash advance applications should only be considered when absolutely necessary. If you’re in trouble, I hope you find these tools helpful.
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