Can You Get a No-Interest Cash Advance Loan?

You have a financial emergency. You need cash. You don’t have friends or family who can lend you money interest-free (although if they can, we suggest you sign a personal loan agreement).

For obvious reasons, you would certainly prefer to have a no-interest cash advance to see you through this rocky period, but how likely are you to get one?

If you're borrowing money, whether it's from a cash advance or a personal loan, you are going to be charged some kind of interest or fee.

A cash advance is a feature on your credit card.

Before we get into why it's impossible to get a no-interest cash advance, let’s first establish what exactly a cash advance loan is; a way to use your credit card to withdraw cash (for more information, read What is a Cash Advance?).

The process for getting a cash advance is similar to withdrawing money from your bank account with a debit card; you put your credit card in the ATM, choose the amount you want to withdraw, and get your money.

However, you will have to pay a fee for taking out a cash advance, in addition to any applicable ATM fees. Since a cash advance is a type of loan and not an actual cash withdrawal, like it would be if you were using a debit card, it is money that you will have to pay back.

In that sense, it is similar to a regular purchase on your credit card. All you're doing is adding more money to your total balance. Credit cards are, after all, a line of credit, which means using your card is taking out a loan that you'll eventually have to repay.

One big difference between credit cards and regular loans is that, if used properly, you can borrow money on your card without ever having to pay any money towards interest. Does this mean that you could also take out an interest-free cash advance?

Unfortunately, no.

Unlike regular purchases, credit card cash advances don't have grace periods.

The vast majority of credit cards have an interest-free grace period on regular purchases. A grace period is an amount of time before a given purchase starts accruing interest. With credit cards, the grace period is usually 30 days.

As long as you pay your credit card bill on time and in full every month, you can avoid paying interest.

Unfortunately, this is not the case with credit card cash advances. There is no grace period for cash advance loans, so interest will accrue immediately. Not only that, the interest rates you will pay on cash advances will be higher than the rates on normal purchases.

To compare interest rates, use a number called the annual percentage rate, or APR, which measures how much a loan or credit card will cost, including both fees and interest, for a full year.

The average APR for a credit card is 22.75%, while the average APR for a credit card cash advance is 24.7%, but could reach 36%. Keep in mind that those are average rates. The lower your credit score, the higher the rate you will likely have to pay.

In summary, not only will you pay interest on your cash advance, you will pay more than you would for a normal purchase.

Interest-free cash advances and loans don't really exist.

In general, it will be difficult to find interest-free loans and cash advances because, with a few exceptions, interest is how lenders make money. Ever since ancient Middle Eastern farmers started lending each other animals and seeds, they required their loans to be paid back with some additional goodies on top for their trouble.

Remember, your credit score will determine what kind of interest you will have to pay on loans you take out, but don't let higher rates lead to your balances ballooning out of control. That will just make it harder to get better rates on future loans and credit cards, which will mean even more money paid towards interest.

So far we’ve been operating assuming you have a credit card. What if you don’t?

You should avoid loans that are advertised as "cash advances."

If you don’t have a credit card, you will not be able to get a cash advance loan, let alone the fabled interest-free cash advance loan.

“But wait,” you say, haven’t you seen ads for cash advance loans in storefront windows and online that suggest you can get a cash advance loan without a credit card?

Here's the thing: Those aren't really cash advance loans. Instead, they're bad credit loans that don’t require you to have a good credit score. And while some bad credit loans, especially installment loans, can be a good financial solution, many of them are not. They are expensive predatory loans that could drive you deep into a cycle of debt.

Two risky kinds of bad credit loans are payday loans or title loans.

Both payday loans and title loans have very high APRs and short payment terms. Title loans use your car as collateral and repossess it if you can’t pay your loan back. These are the kinds of loans where the lender would prefer to roll your loan over to extend the due date in return for additional interest. It works out great for them, even as it steadily drains your bank account.

What are other options besides a credit card cash advance?

Assuming your credit score is in a good place, you can probably get a loan with a decent APR from a bank. If your credit score is in a bad place and you don’t qualify for a credit card, you might still be able to get a secured credit card. A secured credit card requires cash as collateral, but if you don’t use it too much and pay your bill on time, in full every month, it’s a great way to build your credit.

If you have bad credit, don't have a credit card, and need a loan right now, you’re probably going to have to choose from less than ideal options. When searching for the best loan, be sure to compare APRs to find the lowest rate you can qualify for and also check online reviews. You wouldn’t eat at a restaurant with under three stars, so don’t get a loan that will give your bank account metaphorical food poisoning.

And of course, be sure to read thoroughly before you sign anything. A no-interest loan might be a fantasy, but that doesn’t mean you have to settle for a payday loan.