Sudden financial difficulties can strike anyone at any time which can create an immediate need for cash. A cash advance is a short-term loan or a cash withdrawal made with a credit card that enables a borrower to access money quickly. Short-term cash advance loans are also known as payday loans. Failing to pay back short-term loans or credit card cash advances can lead to many negative consequences.
Interest Accrual
One detrimental impact of failing to pay back cash advances promptly is that interest will accrue on the amount you owe over time. The interest rates charged on cash advances tend to be extremely high, so if you fail to pay a cash advance for a few months, the amount you owe could increase rapidly. Cash advances made with credit cards often have higher interest rates than normal credit card transactions and interest may accrue immediately after making an advance.
Fees and Penalties
Another consequence of failing to pay cash advances is that the lender will likely add various fees and penalties to your account. Every time you miss a payment you will probably incur a late-payment fee. The combination of interest accrual and fees can result in a rapid increase in the amount you owe, making it very costly to get out of debt later.
Debt Collection
If you fail to make payments on cash advances long enough, your lender might hire debt collectors to try to get you to pay your debts. You might get mail or phone calls from collectors requesting payment and collectors might file a lawsuit against you to force you to pay. A court judgment could result in wage garnishment, meaning your employer would be required to send a portion of your income to your lender to pay back your cash advances.
Considerations
Since balances owed on cash advances can increase extremely rapidly, the Federal Trade Commission recommends that consumers consider alternatives like a small loan from a credit union before taking out a cash advance. High levels of debt can lead to bankruptcy; bankruptcy has a severe and long-lasting negative impact on credit, which can make it difficult to borrow in the future.
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