More than three-quarters (78%) of all Americans live paycheck-to-paycheck. One unexpected expense can put you in a big jam. Where do you turn when you need money before payday?
What’s the difference between instant pay, payday advance, and payroll loans? It’s crucial for you to know the difference, because choosing the wrong one could set you even further behind on your bills. Let’s discuss the differences so you can make the best choice for your finances.
An increasing number of employers are working with instant pay companies that allow you to receive at least some of your money as soon as you’ve earned it. Fees for you range from free to a few dollars per transfer.
The benefits of instant pay platforms are that you are only getting money you have already earned. That eliminates interest rates that can put you into a worsening cycle of debt.
The downside to instant pay is that you only have access to small amounts of money, which may not help if you have a large expense. It’s also easy to get into a cycle where you’ve already used all your money by payday, so you constantly need to keep doing instant pay transfers to stay on top of your bills.
If you need a larger sum of money (usually up to $500, although laws vary by state), the traditional option was to go to a payday advance company. You could get the money you needed as soon as the same day, but interest rates can be atrociously high.
Payday advance companies are known for putting you into a worsening cycle of debt that can be nearly impossible to get out of when you end up paying as much as hundreds of dollars per month in interest fees alone.
Payroll loans are a new way to advance money from your paycheck. If you work for a company associated with a payroll loan company, are at least 18 years old, and have been employed for at least a year, you may qualify for a payday loan in excess of what you would qualify for with instant pay and with lower interest rates than payday advance companies charge.
With a payroll loan, you can get your money as soon as the same day. Then, predetermined amounts will be taken out of your paychecks to cover the amount of the loan until it’s paid off.
The benefit of a payroll loan is that you can get a large enough loan to significantly help your financial situation. Since the loan repayments are taken right out of your paycheck, it’s easier to repay than setting aside money for a traditional payday advance. That helps reduce the cycle of debt.
Where Can I Apply for a Payroll Loan?
BMG Money works with hundreds of employers to help them provide payroll loans to their employees. Click here to see if they are working with your employer. If your employer doesn’t already work with BMG money, you might consider bringing the idea to your upper management.