Cash Advances – Pros and Cons

Have you ever granted an employee’s request for a cash advance? If you’re an employee, have you ever requested a cash advance from your employer? A payday loan, or cash advance, can sometimes provide the necessary funds to cover the costs of an emergency, past due bill, or mortgage payment. While this type of loan may sound like a financial Godsend, it carries with it both positive and negative aspects for the employer and employee. Here are some of the pros and cons of cash advances:

For the Employer…

1. Pros

  • Payroll issues: One of the benefits for the employer is that fewer funds will be needed to cover payroll expenses. Once the request has been granted, money set aside for payroll can be used for other purposes.
  • Incentives: If morale is low within your company or you’d like to see an increase in employee performance levels, a cash advance could prove to be a great incentive. When an employee meets certain conditions, you can offer an advance as a reward for his or her accomplishments.

2. Cons

  • Requests from multiple employees: If other employees catch on to the fact that you’re granting requests for payday loans, you could have a problem. Without any set standards, you’ll be placed in the position of picking and choosing who receives their pay in advance.
  • Frequency of requests: How often will you make cash advances available? Will you place a limit on the number of requests that an employee can make? No employer has the ability to grant infinite requests, so make sure that rules are established that address this issue.

3. Conditions

Before allowing anyone and everyone to take advantage of your cash advance policy, make sure that each employee who makes a request has met certain conditions. One rule could state that advances are only made available to employees who have been with the company for at least one year. Attendance and performance are other factors that could be considered as well.

For the Employee…

1. Pros

  • Emergencies: No matter what the issue, a payday loan can help to pay for an emergency expense. If a family member needed money to make a mortgage payment, you would be able to quickly procure the money.
  • Incentive to perform: Because it’s likely that an employer will set certain standards in order for an employee to receive an advance, you’ll be more motivated to perform well. This, in turn, could possibly lead to a pay raise or promotion.

2. Cons

  • Mismanagement of money: Unless you take advantage of cash advances sparingly, you could find yourself in serious financial trouble. Loans should not be used to pay for electronic gadgets. Ask for an advance only in case of an emergency.
  • Dependence on advances: You could very well fall into the trap of using cash advances to pay for past due bills if you’re not careful. Take a close look at your financial position to determine whether you’ll be able to pay for “normal” expenses after paying unexpected costs.

Whether you’re an employer or employee, a payday loan can lend a helping hand—or if used improperly, become a nightmare. Make sure to think carefully about the consequences of your decision before taking action.

About the Author:
UK resident Tom Blanchard is a financial consultant and enjoys searching for the best deals on the web to help save people’s hard earned money even further. The site has come out on top of his list time after time, with discounts for everything from office supplies to books on finance.

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