The Vicious Cycle of Cash Advance Loans: Make a Realistic Budget to Avoid |
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Cash
advance loans are high-rate, short-term loans given by check cashers, finance companies and others. There are advertisements on the radio, television, the Internet, and even in the mail that refer to cash advance loans, which come at a very high price and with high interest rates. The procedure is very simple and there is no credit check required. And, there lies its attraction. The customer at the time of getting the cash advance gives the lender a personal check for the amount he or she wishes to borrow, plus a fee. The company gives the borrower, in return, the amount of the check minus the fee. The fees charged on cash advance loans are usually a percentage of the amount loaned. And if you extend or roll-over the loan--say for another two weeks--you will pay the fees for each extension. So, it can be seen that cash advance loans, secured by a personal check is very expensive credit. A short-term cash advance loan is a cash management tool used to provide the customer an alternative means to fill an immediate financial need. Short-term cash advance is an alternative to bounced checks, disruption of utility services, late fees on credit cards, mortgages, or auto loans. It can also be used to cover an unexpected expense, such as an automobile repair bill or emergency visit to the doctor. Cash advances loans are generally intended to provide an answer to a short-term need for cash, between pay periods. Therefore, it shouldn't be viewed as an ongoing way to supplement income. Since not all cash advance agency offers will be equal, choosing the right one requires shopping around, to make sure you are getting the best deal. When choosing an agency, you need to ask yourself, whether the cash advance loan amount be enough to cover your immediate financial needs? And what fees and interest rate will be charged on the loan? And how long with the loan approval process take? When will the money be made available to you? You should compare the requirements for the loan on the websites of the cash advance loan companies. This will save you time when applying. You will also know ahead of time whether you are likely to be approved. Sometimes it's more convenient if you don't have to fax in any documents, proving your income or bank information. Some cash advance loan companies will verify this information by phone instead of asking you to fax it. So, find out in advance, how the company will need you to verify your income. Usually such companies have instant approval and can provide instant money since most of their customers require the cash in a hurry. Also, a majority of cash advance services will not check your credit history before making a loan. But under the Truth in Lending Act, the cost of cash advance loan like other types of credit must be disclosed. Among other information, you must also receive, in writing, the finance charge and the annual percentage rate or the cost of credit on a yearly basis. If for some reason you can't pay off your cash advance loan on the agreed date, then immediately contact the cash advance lender regarding other repayment options. Almost all lenders are flexible, and offer different options or extensions on the loan amount, called rollovers. But be prepared to pay the initial fee again if this happens. It's to your advantage to pay back the fee and as much of the principal as you can, on the first go itself. Whatever you do, don't default on the cash advance loan. If you default on the cash advance loan it can result in a ton of extra fees, not only through the cash advance lender but also insufficient check charges through your own bank. The lender, while approving the loan counts on the fact that most people won't have the money to repay the loan plus the fee when they get their next paycheck. Therefore they will be forced to extend the loan for an additional fee, creating a snowball effect. As a result, people find themselves in even worse financial shape, when loan becomes due than when they borrowed the money. This is a vicious cycle to get caught in, of constantly taking out and extending cash advance loans, which becomes exorbitantly expensive. One way to shun cash advance loans is to make a realistic budget, and figure your monthly expenditures. Also, keep away from unnecessary purchases. Instead focus on saving, to avoid having to borrow for emergencies or other unplanned expenses. This savings, even a small amount, can help you keep away from such kind of expensive loans. |
