Knowing the Costs of a Cash Advance Loan
If you are reading this, you no doubt know what its like to
live from one paycheck to the next.
Some people plan their finances very carefully and make
sure they spend strictly within their means. They will
never splurge on a brand new jewelry set, new clothes or a
swanky new car if they knew it could possibly put them in
the red. However, sometimes even hard working people can
be caught by surprise and thrown into a financial crunch by
some exigency such as an emergency car repair or doctor's
high bill. If you find yourself in this sort of situation,
a payday cash advance loan might just be the extra boost
you need to get through the immediate money crunch.
Before you apply for a payday loan, you should first make
sure you really need it. In case of an absolute emergency
situation, such as unexpected car repairs or a higher than
usual utility bill or high medical bills; taking a loan may
be completely unavoidable. However, you should refrain from
taking a loan, if you have the slightest suspicion that you
may not be to repay the loan on time. You'd only be piling
on more debt on top of the debt that already exists.
Researching cash advance loan companies
It is wise to research cash advance loan companies before
doing business with them. A simple Internet search will
provide you with links to quite a few companies who each
have different requirements and terms. By reading all of
the fine print and comparing what several companies offer,
you will be in a better position to choose the best cash
advance lender for you and your individual situation.
The costs associated with a cash advance loan can vary from
company to company and even from state to state. The laws
in California for instance may dictate certain limitations
on the fees that their companies are allowed to charge.
The same rules may or may not be in force in Florida or
North Carolina.
One thing that you should be aware of is that as a
borrower, you have certain rights from the beginning.
According to the Truth in Lending Act of 1968, all
financial lenders must disclose up front any and all fees
associated with the loan they are offering and must offer
that disclosure to the borrower in writing. This
disclosure also includes informing you of the annual
percentage rate (APR) of the loan (or in simpler terms, how
much the loan would cost you on an annual basis).
The APR of an average loan that is acquired through a
traditional lender is somewhere in the neighborhood of 7%.
Based on recent surveys that have showed the average payday
cash advance loan will cost the borrower about twenty five
dollars ($25) per hundred dollars borrowed, a payday loan
carries an APR of about 650%. How do you arrive at such a
high number? It's simple, really. Let's say for example
that ABC payday lender charges $25 for you to borrow $100
and that you must pay back the loan plus the fee in two
weeks time. If you do the math, the APR of this sample
loan would be 651.79%. Of course as was mentioned
previously, not all cash advance loan companies charge the
same amount. The Truth in Lending Statement will provide
you with all of the details about any fees and charges as
well as show you what the annual percentage rate is for
your particular loan.
Another key factor to keep in mind is the repayment period
for the loan. Typically the loan will need to be paid in
full within two weeks. If you are able to pay off the loan
and the associated fee in that period of time, there is
nothing more for you to worry about. If however you are
like many people who avail themselves of this type of
service you are unable to fulfill your obligation in the
time frame outlined in your original agreement, the
majority of payday cash advance lenders will allow you to
extend the term of the contract. While this can be a
tempting offer that enables you to put off thinking about
your financial problems for another couple of weeks, you
need to be aware that extending the length of your loan
will add to the fees that you are responsible for. Most
often, the fee for such a term extension is higher than the
original fee.
Before you enter this or any other such contract, do your
homework. Don't do what we are all guilty of from time to
time and ignore the fine print of your contract. Read and
understand what you are getting yourself into or you might
just end up paying the price later!
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