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Cash advance loans, also known as short-term loans are offered by check cashing centers for the people as a quick and easy way to get instant money. Cash advance loans end up being an immediate source of relief for people with insufficient cash and for people without any credit cards. The disadvantage of taking up cash advance loans is the high amount of fees associated with them. The fees and interest rates applicable to cash advance loans can end up being higher than cash advance on credit cards. In a typical case of a cash advance loan, a borrower writes a personal check for $100 to $300 payable to a check casher. The fee is usually from $15 to $17.65 per $100 borrowed. The check casher agrees to hold the check until the borrower's next payday, usually one week to one month later. At this point, the check is either cashed or the borrower rolls over the loan for an additional fee. It is observed that cash advance loans turn out to be a rather expensive way of borrowing money as the terms and conditions of these loans are quite unfriendly from the consumer's point of view. According to surveys conducted in some states that have collected data from payday loan lenders, the typical consumer on an average has to renew his cash advance over and over again. For instance, when a person takes a cash advance loan for $200 with a 15-day term, he pays fee at the rate of 17.5%, which amounts to $35. Two weeks later, if he is unable to pay the loan, he rolls it over and pays another $35. At this point of time, he has already paid $70 in fees to borrow the original $200, which in turn amount to an annual percentage rate of 457%. Cash advance loans became legal in California in 1997. At present, 19 U.S. states have banned cash advance loans. According to the companies offering the cash advance loans, these loans provide a valuable service by giving people short-term money to fund emergency situations. Today, many financial institutions and lenders are providing retail financial services that are convenient and reasonably priced. The consumer is now free to choose and is now making a rational choice when in need of instant cash. Some lenders charge cash advance borrowers a fixed fee of $15 for every $100 borrowed which is quite a reasonable amount. For instance, a person needs $300 for an emergency. With any lender, he pays $45 in fees. If the person fears that the check may bounce, he simply pays a $35 overdraft fee to the bank and a bounced check fee of $25 to $35 to the lender. According to the financial service association of America, there are some apparent positive attributes of cash advance loans as well which are as follows: - 92% of borrowers believe it is a useful service and customers use the service responsibly. - 66% use it to cover unexpected expenses or a temporary reduction in income. - 34% use it for planned or discretionary services where most customers are middle-income, middle-educated young families. However, consumer advocates like to point to the other research works that show some of the potential drawbacks of cash advance loans: A recent study by the Indiana Department of Financial Institutions found that the average cash advance loan customer took 10.19 cash advance in the prior 12 months. These points drive to the conclusion that cash advance become a vicious cycle for needy people, especially since they are not used solely on a onetime basis. Lenders also acknowledge the dangers faced by the customers who borrow too frequently and extend their cash advance. Today, some responsible and concerned lending institutions look for ways to monitor this trend and advice clients not to extend their cash advance beyond a certain point. But consumers feeling the need for cash are sure to turn to the cash advance in times of immediate requirement. People use cash advance to pay off electric and phone bills that are due when they run short on cash. The cash advance serves the purpose quite well but also poses the potential danger of a never-ending cycle of debt. Thus, it is important for consumers to realize that they have to payoff their cash advance loan on time and not extend it for the next week. If they do not do so, they will get into the web of debt that will keep on spiraling for a long time. Source: http://www.creditloan.com/are-you-in-financial-trouble-get-help-from-a-cash-advance.html |