Decision Time - Do You Really Need a Paycheck Advance?

It's estimated that about 5 out of 10 employees have asked their boss for an advance on their pay. The Society for Human Resource Management teamed up with Elevate and surveyed more than 400 firms, all reporting in how many of their employees asked for paycheck advances. This really isn't surprising. When an unexpected medical or dental bill or an unexpected home or car repair hits, many who are living from paycheck to paycheck have few options. If you find yourself in this situation, you need to carefully ask yourself if an advance on your paycheck is truly necessary.

Risks and Benefits to Paycheck Advances

Unless your company is set up to offer paycheck advances, you could be taking on a risk by requesting your wages before payday, especially if you have other bills, such as rent or a mortgage, that you really need that money for. You'll find yourself in a tight situation when you do get your paycheck, and to make up that money, you'll again need to find a way to get a cash advance. There's also the chance that your employer will refuse the advance, leaving you stuck for new ideas on where to get the money.

There are benefits to paycheck advances, if you plan them wisely to ensure you have money for upcoming bills. Options like car title loans and payday loans come with high interest rates. Your employer is less likely to charge you excessively high interest and fees for getting your pay in advance. Some paycheck advance programs do have high fees, so make sure you understand exactly what you're getting into before you accept the money.

Research Other Options

Before asking for a paycheck advance, find out from your human resources department if you can cash in unused vacation time. Some companies will pay you cash for your vacation days. They benefit by not having to find a replacement worker while you're away on vacation, and you benefit by getting the money you need. Just remember that you will have to deal with having a shorter vacation or none at all.

Talk to your bank or credit union about a short-term loan. The processing time can take a few days or weeks, but the interest rate and repayment plan will be to your benefit. If they cannot help you, a payday loan company or cash advance firm can be helpful in securing you the cash you need.

Talk to your creditors. Many companies will work with you if they have a set date when you will be able to make the payment. Your landlord might be willing to delay the collection of rent by a week, your doctor or hospital might be able to come up with a way to break your medical bill into smaller payments for a specific amount of time. It never hurts to ask.

Once this financial issue is past, it's in your best interest to start putting a percentage of your pay into an emergency fund. This way the next time an emergency hits, you'll have some savings on hand to cover the unexpected expense.