How Does a Paycheck Advance Work?

How Does A Current Paycheck Advance Work?

Short on cash before your next paycheck? You’re not alone. More than half of Americans live paycheck to paycheck, according to MarketWatch reports, and more recent financial census data shows changing poverty rates in cities across the country. Some consumers may not be able to keep up with the fluctuating costs of living when juggling car payments and rent, so you may need to access some of your next paycheck to make ends meet. So how does a paycheck advance work, and when can you ask your employer for one?

A paycheck advance, also known as a payroll advance, allows you to access a portion of your paycheck before payday. By accessing future wages, you can cover rent payments, medical bills, and more without dipping into your savings account. Your employer will expect the advance to be repaid by the next pay period in many cases, so before you take out an advance payment, understand that your future earnings will be affected. Borrowing money from your paycheck can help you get back on track! Employers will typically take the advance out immediately from your next paycheck, meaning that your check will just be smaller than it usually is to cover the balance you owe. 

What to Know About Paycheck Advances

Keep in mind that the repayment process for this loan option will vary with each employer. In some cases, you may have to cover additional costs besides the borrowed amount, including any administrative fees or interest set by your employer’s policies. Once you withdraw money from a paycheck advance, your employer can repay the loan through deductions from your future paychecks in one lump sum or over various pay periods. 

Make sure you speak with your employer about how a payroll advance works within your company. Go over different aspects of your loan to have a full understanding of this borrowing method and decide if it’s the right decision for your financial situation. Call a Max Cash^? representative at 833-207-9052 to discover other loan types that can help you get emergency cash, such as personal loans, title loans, or payday loans.² ?

How Do I Get My Paycheck In Advance?

You can get your paycheck in advance in a few different ways, depending on your situation. Some employers offer on-demand pay or earned wage access programs through apps like DailyPay, Even, or Payactiv, which let you withdraw part of your paycheck before payday. Others may allow a direct payroll advance if you request it through HR or payroll, with repayment being deducted automatically from your next paycheck. 

Depending on your bank or credit union, you may be offered early direct deposit, giving you access to your paycheck up to two days early. Cash advance apps such as Earnin, Brigit, or Dave can let you borrow a portion of your paycheck, usually for a small fee, to access the funds the same day you need them. If you work with a cash advance app like Current, they may take a portion out of your borrowed amount before they deposit the rest of your money into your account. In the event that you’d like a smartphone app to retrieve your funding, it is recommended that you work with services that are sponsored and funded by employers to avoid the extra fees that are charged by third-party platforms. 

Regardless of whether you use a cash advance app to borrow money from your paycheck or request a direct payroll advance, you must review the terms of your loan carefully to ensure that it fits with your present budget. You can always talk to your employer or HR representative about their suggested smartphone apps so you can access your money comfortably without any issues. 

Do You Have To Pay Back a Salary Advance?

As mentioned earlier, employees who sign up for a salary advance must repay the money they borrow; a paycheck advance is essentially a short-term loan given by an employer, so it is required that an employee pays back their funding, just like with any other loan. Unlike many loan options, though, a paycheck advance works differently in that an individual pays their entire loan amount. Instead of making payments to a lender with a direct deposit or a check, the employer automatically deducts the amount an employee owes from their future paycheck. 

When considering a salary advance to pay an unexpected expense, it is important to factor in any complications you may have with your next payday. If you’re paid biweekly and have pending living expenses the week of your paycheck, you may have a reduced amount of money compared to your previous paycheck.

Add the fact that you can enter into a cycle of debt if you access your salary advance through a third-party system that charges extra fees and high costs. That’s why it’s recommended that you have a financial roadmap in place before you decide to take out a payroll advance. You can end up in a worse situation than you were prior to your financial emergency.

How Soon Can I Borrow Money From My Paycheck? 

If you’re struggling with a hefty veterinary bill or an urgent car repair, you may want to get your paycheck sooner than anticipated. Fortunately, as mentioned previously, you can get your payroll advance as early as the same day you apply for this loan! While some banks can take a few business days to send you your money, you can sign up with a service like Earnin or Brigit to get your money as soon as the same day! However, it’s worth noting that you’ll generally pay a fee to receive your funding in such a short timeframe.

The amount of money you must pay to cover these instant transfer fees can vary with each service, but you can expect to pay a small total to get your payroll advance quickly. Some cash advance apps, like Chime, can provide you with your funds within 24 hours, but you must still pay a fee to get your money in an instant. If you prefer to get a paycheck advance through a third-party app rather than your employer-chosen service, you must research the best platforms that give you your money without any costs. In the event that you feel that you need your funds quickly, you must consider how much cash you’ll end up with by covering this instant transfer fee and any other additional costs the cash advance app may require.

Alternative Options for Getting a Paycheck Advance at Work

Wondering if there are other ways for an employer to help you during a financial crisis? If you’re not fully convinced about getting a paycheck advance, you can consider some of the following alternative options if they’re available within your company:

Employee Hardship Loans

Some employers may offer formal loan programs for employees experiencing a tough, unexpected situation. These loans are typically available through an Employee Assistance Fund (EAF), otherwise known as an Employee Relief Fund, that is designed to provide temporary financial relief for essential needs. The eligibility criteria for this loan type usually require an individual to demonstrate that they are unable to meet basic living necessities and meet a few other key requirements. Depending on which hardship loan your employer offers, you may work with little to no interest rates during the repayment period. 

Compensation and Benefits

 If you’re in the middle of financial circumstances, you can try asking your employer for any cost-of-living adjustments or performance-based incentives to help you during these difficult times. It may sound implausible to request these arrangements with your employer, but asking them for assistance can result in some options you can consider to get things back on track with your finances. 

401(k) Hardship Withdrawal

Depending on your employer’s plan, you may be able to borrow from your retirement savings in the form of a hardship withdrawal to meet an immediate and heavy financial need. This withdrawal is subject to the rules of the plan and IRS regulations, meaning you must prove that you have no other means to handle your expense, and you can only withdraw the minimum amount necessary to cover it. Common qualifying events include medical, tuition, funeral costs, or purchasing a primary residence, and the funds are subject to income tax. If you have another situation outside of these qualified scenarios, you must contact your plan sponsor to learn what you can spend money on in your situation.

If you’re dealing with an urgent bill that cannot wait until your next payday, you can try one of the aforementioned solutions to manage that expense. Your employer can offer several resources to assist you during your tough financial crisis, so don’t hesitate to ask them for any methods they can provide to get yourself back on your feet!

Can I Get a Payday Loan with My Check Stubs?

Yes, you can get a payday loan online by using pay stubs from your employer as proof of income, along with a valid, government-issued photo ID card and an active bank account to meet the lender’s requirements.? If you want another way to get money without taking it directly from your paycheck, a payday loan can be a good option to consider to bounce back financially. While a salary advance can be helpful when struggling with a sudden expense, you may need a larger loan to handle significant expenses. An average American will spend 43% of their paycheck within the first three days, typically on essential expenses like housing, food, and transportation.

If you can’t stretch your paycheck enough to pay a considerable expense, you can check out some valuable payday loan or cash advance options with Max Cash^?! Simply fill out a brief online form now to get started on your inquiry and discover which lenders fit your unique situation. You don’t need a perfect credit score to qualify for any of these loan options, and you can use your funds to handle any personal expenses!² ?