Cash advance, or payday loans, are the perfect way to make ends meet between paychecks. Or are they? Cash advances otherwise known as check cashing, payday loans, deferred deposit loans, or payroll advance loans, are high interest loans that are easily obtained in a very short time. Obtaining a loan is simple, payday loan companies are all over the internet and are easy to find with a simple search and all you need is a job and a bank account. First you find a company that you wish to do business with, you fill out a simple application giving your employer and bank information. It usually takes an hour or so to find out if you qualify for the first loan, the loan company needs to verify your employment and your bank account. Funds are usually available the next business day as long as the application was submitted before 3 pm. Terms for Payday loans are typically the same, with some variations so make sure you check with each company BEFORE applying for a loan with them. There are usually three payment options to choose from when obtaining a loan; 1. Payoff of Principle and Interest in full 2. Pay down on principle (increments of $50) plus interest renewing balance of principle 3. Pay only interest and renew entire principle Interest rates for these type of loans range anywhere from 391% APR to upwards of 800% APR. Say you obtain a loan for $300. Your interest will probably be around $90 for a 14 day loan, leaving you owing $390. When your next pay period rolls around you pay only the interest and renew the principle. The loan company then automatically withdraws $90 from your bank account, making your new balance $390 for the NEXT pay period. It is very hard to get out from under these types of loans once you get started with them, especially since it is all to easy to go out and get another payday loan from yet another loan company and before you know it you are paying $500-$1200 a month just in interest fees and never being able to pay the principle or any of your other bills for that matter, completely defeating the purpose of obtaining the loan in the first place. Payday loans should be avoided whenever possible. If you find yourself short on funds take a close look at your situation. Ask your employer about an advance on your paycheck, there would be no interest or fees and most employers are sympathetic and it never hurts to ask. Another option would be to talk to your bank or credit union about Ready Reserve, or overdraft protection, for your checking account. This is a low interest loan attached to your checking account which pulls money over to your checking account, usually I increments of $500, in case of a negative balance therefore causing your account to stay in the positive and not having you pay all the overdraft fees. The bank automatically withdraws a small amount ( about $30 for a $500 loan) a month from your checking a puts it back into your ready reserve account for you to use again in case your account goes negative again. Ready reserve is considered revolving credit since it is not a term loan and is continuous and can be borrowed from again and again. |
