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Understanding Short-Term Credit: An Overview of Three Types

No matter how good you are at budgeting and managing your personal cash flow, there are times when you need cash quickly. Whether it be unexpected car repairs, a burst water pipe, or a medical emergency, it is important to understand all your options when it comes to borrowing cash quickly. This post provides an introduction to three different types of credit that can help when you’re out of cash: instant payday advance, line of credit, and overdraft protection.

An instant payday advance is one of the simplest options for people who need cash quickly. As the name implies, an instant payday advance is instant. For people who need cash right away, payday lenders will provide the cash immediately. Payday loans are a great option for people who don’t have a line of credit, credit card, or overdraft protection, or people who have reached their credit limit. An instant payday advance is also great for people who don’t have a strong credit history, or who have been declined by the banks.

imagesA line of credit, sometimes known as an LOC, provides standing access to money as needed, but only charges interest when the account holder draws against the available credit. People who have a good credit record, a regular job, and a verifiable employment record are typically able to secure an LOC. They are a great option for people who need cash quickly, but the initial paperwork can take time. If you need cash instantly and don’t already have a line of credit in place, this may not be the best option.

Overdraft protection is great for people who live paycheck to paycheck, and are worried about having enough money to cover the regular payments being drawn from their bank account. If, for example, you’re worried you don’t have enough money to cover the bills each month, overdraft protection may be the right option for you. However, like a line of credit, it needs to be set up in advance. If you need cash in a hurry, and haven’t already set up overdraft protection, this is probably not the best solution.

Hopefully this has been a helpful introduction to three popular ways to cover a cash shortage. While a line of credit is great if you can get it, an instant payday advance can be a much more convenient option when you’re in a bind.

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