Be Cautious When Taking Out a Cash Advance Loan

Has Christmas left you short of money? Need some quick cash? Getting a cash advance may be the answer, but beware, there are risks involved and you need to know exactly what you're signing up for.

Taking out a cash advance requires little on your part. All you need to do is prove you have a bank account and a job with a minimum monthly salary and the money is as good as in your bank with the cash being available in less than one day. However, money that comes this easy also comes with a few red flags and warnings.

Here’s what to look for:

Maximum Loan. How much can you borrow? Most payday loans have a maximum of $1000 or $1500. Consumer advocates warn against taking out a number payday loans, particularly at once. Not only because the fees you’ll be paying are expensive but because many banks will close your account if you bounce too many payday loan checks.

Most payday loans are paid back by the lender cashing a predated check that you write. If this money isn’t in your account when the loan comes due, the check will bounce and your bank will make record of it. If you’re taking out several payday loans to cover a debt or payment, and the funds aren’t available then the bank can close your account, which means it may be difficult to get another bank account.

Term. How long do you have to pay back your loan? Standard loan terms range from one week to two weeks. Make note to find out exactly when the loan is due and your check is going to be cashed so you can make sure you have money in your account.

Fees. How much is your loan going to cost you? The standard rates seem to range between $30 and $40 per $100 borrowed. That means that if you borrow $100 you owe $140. On top of that, if you’re unable to pay the loan back when its due you may owe significant fees. Find out what these fees are before you sign on the dotted line.

Contract terms. Some lenders have lots of small print. Read the small print. Many online lenders have a policy where they automatically deposit cash into your account every month, and they automatically deduct that cash, plus a fee, every month. Make sure you’re not signing up for one of these loans or you’ll be paying your lender on a monthly basis for loans that you do not need and getting out of this loop can be difficult.

Because payday loans are so expensive and there are inscrutable lenders out there, it may be helpful to consider other options.

• Looking to local community-based organizations may make small business loans to individuals.
• Asking your creditors for more time to pay your bills. Find out what they will charge for that service - as a late charge, an additional finance charge or a higher interest rate. This may be significantly less than what a payday loan will cost.
• Find out if you have, or can get, overdraft protection on your checking account.
• If you need help working out a debt repayment plan with creditors or developing a budget, contact your local consumer credit counseling service.
• Look at the possibility of obtaining a credit card. The cash advance fees and interest rate may cost less than a payday loan.
• If you decide you must use a payday loan, borrow only as much as you can afford to pay with your next paycheck and still have enough to make it to the next payday.

Being short on cash is never fun and it happens to millions of people every day. Examine all of your options, read the fine print, and determine if a payday loan is your best option.

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Is a Cash Advance Loan Right for Me?

With the holiday season here, and Christmas right around the corner, many are looking for cash to help with the holiday spending. One way of getting cash to help is through Payday loans or Cash Advances, but is it right for you?

Payday loans or cash advance loans are personal unsecured loans, which means you don’t have to put down any collateral for the loan. You do however have to pay significant interest rates and fees. They can be good for someone who is an immediate cash crunch, if you’re willing to pay the price. For example, you have a car or home payment which is due tomorrow and you don’t have all of the cash you need to make the payment. Rather than risk a late payment, expensive fees, and a bad mark on your credit report, you decide it is worth the extra fees to get a payday loan.

Payday lenders are able to charge such high rates because the loans are unsecured and they take very little information from you. Meaning, for the lender they are incurring a bit of risk, which you’re paying for. All you really need to get a loan is a job, an address and a checking account that is in good standing. Another benefit for consumers is that they money is available almost instantly with cash in hand times ranging from one hour to 24 hours.

One of the nice features about cash advance loans for consumers is that they are easily accessible and you can likely find a cash advance store in your hometown or online – whichever is more convenient for you. The average loan pays out generally no more than $1000-$1500 and the loan term generally lasts less than 14 days. The fees generally range from $20-$40 per hundred dollars. That means if you borrow $1000, you owe them $200-$400 in fees. Pretty steep, though some do charge a flat fee of around $30 or $40. If you extend or "roll-over" your loan, you will pay hefty fees for each extension.

If you’re in a bind and need cash fast, the process is simple. In store you would write a personal check payable to the lender for the amount you need to borrow plus a fee. So if you’re borrowing $300 and the fee is $40 per every $100 borrowed, you’d write a check for $420. The lender will give you the amount of the check minus the fee. They’ll give you $300. If you borrow online, the process is similar in that you give them your routing number and account number and they deposit your loan into your account.

Payday or cash advance loans are an alternative for people in a cash crunch, however great care must be taken to make sure borrowing doesn’t turn in to a cycle of debt. When the loan comes due, not being able to make a payment will result in extremely costly fees. Be careful and weigh all options before you make a decision to obtain a payday loan.

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Payday Loans vs. Credit Card Advances...

A bill is due tomorrow, your bank account is low, and you need cash fast. What can you do? Many turn to the payday loan option. This option has several pros and cons.

The Pros of a payday loan:

• You can get cash in less than an hour.
• You can make the transaction online.
• You don’t need to put down any collateral, they’re unsecured loans
• You don’t need much information to process the loan.
• The money is deposited right into your account

The cons of a payday loan:

• The fees are very high, generally ranging between $30 and $40 per $100 borrowed.
• The term of the loan is short, usually less than 14 days, which means you absolutely must have the money coming your way soon to repay the loan or you’ll be paying very high fees.
  
• Many lenders have an automatic deposit and withdrawal system whereby they deposit a loan into your bank on a monthly basis, and then take the money out on a regular basis. Not only do they have free access to your bank account, you’re paying monthly fees and the plan can be difficult to get out of.

Another option you may consider is a cash advance from your credit card. Here are the pros and cons of that option.

Pros of a credit card cash advance:

• There is no authorization phase. It is your credit card and you've already gone through the application process.
• All it takes is a trip to your local ATM and you can deposit the money in your bank.
• You know and have a certain amount of experience with your creditor versus no prior relationship with a payday loan company.
• You control when you pay back your cash advance.
• You can borrow as much as you need, up to your limit

Cons of a credit card cash advance:

• The fees are high.
• Your interest rate for your cash advance may be different than your regular APR
• Without a pre imposed payment deadline, the interest can climb and you may end up paying on your cash advance for years.

When comparing your options, consider how much money you need, how fast you will be able to pay it back, and what fees your loan will cost you. Consider obtaining a small personal loan or speaking with the company or person you owe money to, to see if different payment arrangements can be made. Both payday loans and credit card cash advances are an expensive solution. However, both can also get you out of a quick financial bind.