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Cash Advance A Sharking Industry |
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Enter the cash advance industry, an industry that has come of age the last couple of years. Cash advance has circumvented laws that have been shaped to safeguard people against loan shark practices. Short-term loans are given out at too high interest rate. Cash advance is a somewhat new multi-billion dollar industry in which people borrow money to tide them over until their next payday. These
loans also go by the names payday loans and paycheck loans. Take a look at the APR (annual percentage rate) these loans carry before going for a cash advance. At first glance, you may think paying $240 for a loan of $200 for two weeks is OK. The APR of this cash advance loan comes to a massive 520%. That is the amount this loan would cost if paid over a years time. Compare this with a high interest credit card of 29%. When you see it compared to these numbers, you can see they are not the bargain you first thought it was. Representatives of a cash advance company said that there are loopholes out there that allow them to justify these huge interest rates. This is a high-risk loan for most cases so they need to charge enough to cover bad loans and to make a profit. When asked about if cash advances are ever a good idea, many experts say yes. For example if you will be late on a credit card payment of $70.00 and will be charged a late fee of $30.00 then the APR of the cash advance justifies getting one. You will save points if you get a cash advance and not pay the higher interest rate of the late fee. When you should get a cash advance At times cash advance is justified as discussed above in the primary example when your late fees are more expensive than the late fees paid to your creditors. Another non-tangible justification is when you can avoid getting reported for a late payment. This can be far more expensive than any cash advance fee in that it could affect the cost you pay for future loans. This is especially true if it's your mortgage or car payments. Another justification for going to a cash advance is that you agree on that the cost is worth it to you personally. If you are headed for the long awaited vacation and could use a few extra bucks to enjoy and can afford the fees then you should look into this. A final consideration on when you should get a cash advance is if you need that cash and it's free. That's right free. There are a many sites out there that charge ZERO interest to all first-time customers. What to look for when getting a cash advance APR on the loan is the primary cause for concern. Federal law has made it so that every cash advance lender must disclose the cost of any money borrow through a Truth in Lending Disclosure. This must break down the cost by APR (annual percentage rate). This is the first thing to compare loans by. One more thing to look for cash advance is the length of the term. If two cash advance companies charge the same rate for every hundred dollars borrowed, but company A has a term of up to four weeks and company B has a term of two weeks, then go for Company A and take advantage of the extra two weeks. The APR of Company A is half of Company B. The cause this differs from the first item is that sometimes they base APR on a fixed time (two-three weeks usually). When you read the fine print that the fee charge is fixed and may allow you to pay it back in a longer term, such as four weeks. So, be well informed about cash advance loans and look for free or low cost cash advance if possible. The money you save can be substantial. |
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