Payday Loans Explained |
Cash Advance Advantages |
Which Payday Lender? |
Payday Loan Disadvantages
Personal loan and cash advance
loan ads are on the radio, television, the internet, even in the mail.
So what are they and how do they work?
Check cashers, finance companies
and others are making small, short-term, high-rate loans that go by a
variety of names: payday loans, cash advance loans, check advance loans,
post-dated check loans or deferred deposit check loans.
Usually, a borrower writes a personal check payable to the lender for the
amount he or she wishes to borrow plus a fee. The company gives the
borrower the amount of the check minus the fee. Fees charged for payday
loans are usually a percentage of the face value of the check or a fee
charged per amount borrowed - say, for every $50 or $100 loaned. And, if
you extend or "roll-over" the loan - say for another two weeks - you will
pay the fees for each extension.
Under the Truth in Lending Act, the cost of payday loans - like other
types of credit - must be disclosed. Among other information, you must
receive, in writing, the finance charge (a dollar amount) and the annual
percentage rate or APR (the cost of credit on a yearly basis).
A cash advance loan secured by a personal check - such as a payday loan -
is very expensive credit. Let's say you write a personal check for $115 to
borrow $100 for up to 14 days. The check casher or payday lender agrees to
hold the check until your next payday. At that time, depending on the
particular plan, the lender deposits the check, you redeem the check by
paying the $115 in cash, or you roll-over the check by paying a fee to
extend the loan for another two weeks. In this example, the cost of the
initial loan is a $15 finance charge and 391 percent APR. If you roll-over
the loan three times, the finance charge would climb to $60 to borrow
$100.
If you need cash quick these types of loan may
work for you, but make sure you pay it off ASAP to avoid excessive fees. A
good alternative is to find a low interest credit card with a 0 APR intro.
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Whether it's to stop a check from
bouncing or the simple convenience - there are some advantages to cash
advance / payday loans.
Applying for online payday loans offers several
advantages over applying at a traditional payday loan shops. Payday loan
applicants apply directly from their home or office computers via the
internet, never having to stand in line and wait in a store line. Many
people choose to apply for online payday loans for personal reasons,
because they simply do not feel comfortable going to a store
specializing in payday loans and check cashing.
The online payday loans application process can also be a significant
time saver. In-store applications must be handwritten, and completed
entirely in the store. If an applicant does not have all the required
information and paperwork they are unable to complete the application and
the loan cannot be processed. Online payday loans applicants may pause
while filling out the application form and take time to locate the
required information.
Online payday / cash advance loans can be processed in under 48 hours and
you can have cash for you needs.
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Follow these tips on finding the
right payday loan / personal loan lender.
Selecting the right online payday lender is very
important. Here are some important things to consider before filling out
any online application:
- The payday lender’s website should be professionally
designed and well organized.
- The information presented on the site should be clear
and easy to understand.
- The site should contain a FAQ answering important
questions about them and your payday loan.
- The site should never charge any application fees or
other fees before giving money.
- There should be a complete Privacy Policy clearly
posted
- The application should be comprehensive and
organized. Beware of payday lenders that promise instant approvals based
on only a few questions.
- IMPORTANT – only consider payday lenders that have
SSL certificates on the application page. This certifies that your
financial data is being securely transmitted.
- A contact page with an email address and phone number
should be present.
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Personal loans, cash advances, and
payday loans are all quick cash when you're in a bind, but buyer beware!
The ads are on the radio, television, the Internet, and
even in the mail. They refer to payday loans - which come at a very
high price.
Cash loans are relatively easy to obtain. The banks/lenders will even send
you checks in the mail if you are a homeowner or have good credit and by
cashing the check you agree to their terms and conditions of the loan.
Some types are offering no credit checks and quick payouts of cash. They
can even be obtained over the internet!!!
The cost of loans of this type is fairly high. This is due to the added
risk taken on by the lender when issuing un-secured loans. Typically
backed only by a personal promise to pay.
Make sure you read the fine print on the lenders recourse in case of
default. It's also best to shop around because the rates/fees will vary
and even if it's a savings of $5 - on $100 loan that's 5% savings right
there. There are plenty of companies that do these loans so take a minute
and review a few before deciding.
It might make more financial sense to get a 0 APR credit
card to pay your bills rather than get a high interest cash advance.
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