Maybe you have a pretty steady job and get paid regularly, but potentially payday only comes once every two weeks or so. Sometimes this can put you in a rough place if you’re in a cash crunch in between pay periods and are facing consequences if you don’t make a payment right away. Many Americans often find themselves in these kinds of situations where they don’t have immediate cash on hand and need to borrow to get by. Sometimes the solutions they use are payroll advances, either borrowed through their employer or increasingly, through third-party lenders.
Why Cash Advances Can Work
One of the main benefits of a payroll advance is its ability to bridge a gap in income when the bills are due or unexpected expenses arise. Rather than be bound by the cash flow restrictions of scheduled payroll, working men and women have the opportunity to make important spending decisions when necessary. This can keep a car from being repossessed or make sure the tuition is paid up on time. In countless situations and scenarios, families across the map count on cash advances borrowed against future income to make ends meet.
Why Payroll Advances Aren’t Too Popular with Employers
While payroll advances are usually beneficial to employees, they can be burdensome for employers. Some smaller businesses just simply don’t have the luxury of a cash flow that’s large enough to be able to offer employees advances on their annual salaries in between pay periods. But even for those who can, payroll advances can cause headaches for the HR and accounting departments, and it could also mean having to deal with IRS audits or other tax problems depending on how many employees ask for advances and how frequently they do so. Lots of regulation on lending businesses that sometimes applies to payroll advances are also why many employers have stopped offering them.
Why Loans Against Paychecks are Also an Option
Because it is a burden on businesses to give out payroll advances before the end of the pay period, over-reliance on borrowing this way is usually discouraged by employers. But it still is possible to borrow against a future check if you go through a lender that offers that service. What this does is work like a standard employer-to-employee advance by spotting you a cash amount that will usually be the amount of your paycheck, but instead of coming from your employer’s cash flow it comes from an independent lender. These loans are helpful if you only need a few hundred dollars or so and can pay them back in the short term. People also use these loans because they are not asked what they will use the loan for.
Budget and Save Instead
Probably the best way to guard against needing big loans is being able to budget and save. Discipline yourself not to spend all your savings on weekend fun after work or going out to eat all the time. When you build a personal budget and make sure you’re putting money where it can help you later, you’ll find much less need to ask for a payroll advance or borrow against your paycheck.
These days it seems out of the ordinary for families to be in financially stable situations. The result is they are often one or two bad events away from landing themselves in need of cash fast. This is where cash advances, otherwise known as payroll advances, come into the picture. As long as borrowers use them responsibly, they provide a strong backstop in the event of financial emergencies in between paychecks.