Mevish Jaffer, Contributing Editor
The payday/cash advance loan industry is the subject of a lot of criticism. In fact, many people have gone as far as to compare payday loan companies to “loan sharks” or “predatory lenders” out to get innocent consumers who are in financial need. However, you have to ask yourself if this type of comparison is actually fair and completely accurate.
Payday Loan Basics
A cash advance or personal loan is a short-term loan, which in most cases is no more than around $1500. Consumers generally apply for a payday loan in between pay periods as a means of economic sustenance in the case of unforeseen financial emergencies such as:
- Medical expenses
- Auto Repairs
- Unexpected bills
The payday loan is typically given to a borrower in the form of cash and is generally secured by a post dated check. Borrowers are required to repay the loan on their next pay day.
Payday Loans = Higher Interest Rates
The brunt of the criticism dedicated to the payday loan industry comes from members of established lending industries, including banks and credit unions. This is essentially due to the higher interest rates and fees attached to these types of short-term loans.
For example, let’s say you receive a $200 cash advance loan, a week or two later, you will be required to repay $225. Now granted the extra $25 might not be so bad, especially if you really needed the cash at the time. However, applying the same repayment period in comparison to the interest rates offered by a bank or even a cash advance from a credit card, there is no denying that the payday loan adds up to a much higher percentage. Basically, if you are comparing only interest rates, it stands firm to say that the APR on a payday loan is significantly higher.
Payday Loan Positives
We’ve established that higher interest rates are attached to payday loans; however there are also other issues to take into consideration. For one thing, can a bank or credit union loan you a quick $200 when you are in desperate need of it, and for that matter on the same day? Also think about this; will a bank or credit union even take the time to talk to you if your credit score is nothing short of satisfactory? The answer to these questions is most likely no, which makes it all the more harder to borrow money in times of need. With payday loans, credit checks are not mandatory and very little documentation is involved in the process.
In essence, cash advance payday loans exist for a reason, and that reason is to meet the demand for consumers who need access to immediate cash. Additionally, with online payday loan services, you are able to apply for your cash advance in the comfort of your own home.
The Bottom Line
When it comes right down to it, you should only use cash advance payday loans in times of financial emergencies. There are also some factors you should be aware of before accepting a cash advance. Make sure you are fully aware of the total amount that must be repaid, the date repayment is scheduled for and most important of all, you must ensure that you will have the funds necessary to make the payment. You can also learn how cash advance payday loans can help you out of a financial bind by visiting the Web site, www.paydaycashadvanceloans.biz for more information.