Home > Payday Loans >
Cash Advance Loans > Cash Advance An Expensive Way Of Borrowing Money
Cash Advance An Expensive Way Of Borrowing Money |
|
Cash advance loans are a financier's dream. The equation is simple: Lend money to people with stable jobs, but with short-term cash problem and charge up to 800% interest. Just think about the profit! That is why hundreds of street corner bankers are investing money into this money-spinning business making cash advance one of the nation's fastest growing industries. All you need is a postdated check given to the lender, to be cashed on your next payday, to walk out with cash. Terms of cash advance are flexible and can be altered or renewed according to your need. Cash advance lenders can be found anywhere in the country and they are doing well. But the Federal Trade Commission (FTC), the Consumer Federation of America and the Consumers Union have all expressed strong concerns about the cash advance industry. According to them there are few things that consumers must know while opting for a cash advance. Take an example of a typical payday loan of $200 for 14 days with a fee ranging from $15 to $30 per $100 borrowed. The borrower writes a $240 postdated check and gets $200 in cash. Most consumers are not aware that the $200 loan for 14 days plus fees is at an APR of between 390% and 780%. Cash advance lenders would dispute that a onetime late fee on a credit card is just as high an APR. But the fact is a $30 late fee on a $200 credit card balance is an APR of 178% and still much lower rate than average cash advance. Many states have usury laws preventing a lending company from charging excessive interest rates. New York has an interest cap of 25% for all cash advance made within the state. However, payday lenders are offering cash advance in New York and other states with usury caps and charging the same high fees by purchasing or leasing another bank's usury license from a state without usury laws or with a high usury cap. In addition, national banks charter many payday lenders. The Consumer Federation of America has harsh words for partnering banks. According to them, banks continue to play a major role in enabling payday loan chains to evade state usury, small loan and payday loan laws. State-chartered, federally insured banks claim the right to export home state interest rates and to preempt some state consumer protections to be on an equal regulatory footing with federally chartered banks and thrifts. Recent studies show that 75% of payday loan borrowers roll over their cash advance at least once. Payday lenders are banking that borrowers will not be able to pay their loans at the end of two weeks and will then be assessed another fee of $15 to $30 per $100 borrowed. A recent study reports that about one-third of borrowers rollover their cash advance seven or more times, multiplying the already high APR for the original loan too more than 1,000%. Cash advance lenders seldom lose any money and make huge profits. Consumer reports say that by requiring consumers to turn over a postdated check, consumers are often coerced or harassed by illegal threats or collection practices. For example, they will be threatened with jail for passing a bad check, even though the law specifically says they can't be prosecuted if the check bounces. Consumer Reports also recommend that credit from finance companies may be better option, with APR of merely 25% to 35%. Experts say that people can dealt with their debt issues by negotiating repayment plans with creditors (or using a consumer credit counseling service to do so on their behalf); getting an advance from their employer; getting cash advance from a credit union; using checking overdraft protection as an emergency short- term loan; or going to a legitimate finance company. Cash advance may not be as bad as prison, but at best you pay far too high a price for the loan and at worst create a financial nightmare!!! |
|
| ------------------------ |
|---|
|
|
| ------------------------ |
|---|
|
|
|
|
| ------------------------ |
|---|
|
| ------------------------ |
|---|
Custom Search
|
| ------------------------ |
|---|
|
|
| ------------------------ |
|---|
Consumer Alerts | About | Bookmark Us | Contact | Espanol | Privacy Statement | Copyright | Terms & Conditions | Financial Widgets | SiteMap
Copyright © 2006 Credit Loan, LLC. 235 APOLLO BEACH BLVD, STE 218 Apollo Beach, Florida 33572 All rights reserved.
Disclaimer: The content provided on CreditLoan.com is for informational purposes only; do not make any financial decisions based on its content. Financial decisions are personal, based on an individual's situation. Consult with a financial professional before making any financial decisions. CreditLoan.com is not liable for your financial actions.
