If it was nine days until your next payday, you were close to broke and there was no other place where you could get a fast loan, would you go to one of those places that offer cash advance loans?
Many people do
It’s pretty clear that a lot of people do. There are companies such as AdvanceAmerica, a service of MoneyGram, that will give you a cash advance loan either in person or online. I checked its website recently and found that this company alone has seventeen stores in my city. QuickenCash, which is a service of Quicken Loans advertises that it can get you approved in two minutes for cash advance loans from $100-$1000 and it’s all done online.
The pros of cash advance loans
The biggest upside to cash advance loans is that you can get one quickly even if you are a high-risk borrower. You might need the money fast because your car broke down, your kids need money to finish a project for school or you received a notice that your utilities will be turned off if you don’t pay the bill within three days.
How they work
Cash advance loans are very short term and typically expire within fourteen days. Theoretically this is enough time for you to cover the loan with your next paycheck. In addition, there is no complicated application process and it doesn’t matter how bad your credit rating might be. Plus, you can usually get the money within one business day or less.
Cash advance loans are often called payday loans because they tie repayment of the loan to your next payday. The amount you will be able to borrow will depend on your income and your employment. In other words, if you have an employment history, you should be able to get a cash advance loan.
The cons of cash advance loans
There are several negatives to cash advance loans. First, they usually come with very high interest rates. Sometimes the interest is a flat fee, other times it is a percentage of the loan. As an example of this, I know of one cash advance lender that charges $17.50 per $100 borrowed or 17.5%. On an annual basis that can be equivalent to a 300% to 600% APR. 17.5% may not seem like a big deal but you are paying that large of a fee for only a 14 day loan.
The second big negative of these loans is that you’re borrowing against your next payday. This means you’ll start your next pay period short of your full pay. You could easily find yourself short of cash in 10 days and have to roll over the loan so that you’ll have to pay yet another fee – meaning that you’ll start your next payday short of funds and could have to roll over the loan again. There are people who began by borrowing just a few hundred dollars as a cash advance loan and ended up owing thousands of dollars because they had to keep rolling over that original loan – again and again.
Cash advance loans can quickly lead to a downward spiral of debt that can be near to impossible to get out of. They are only a temporary solution that can have severe negative consequences. Give us a call today and talk about how you reduce your bill payments and get out of debt.