Cash advances tips n tricks

Cash advance companies say one of the biggest benefits they offer is that they make loans available to those who would never get them from the banking system. This is quite true in many cases.

There is a segment of society that does not have access to credit cards, bank loans and other normal forms of funds. They have low incomes and poor or non-existent credit. It is a valid observation that payday loans are sometimes almost the only way out for many such people.

Payday lenders also point out that abusive collection practices are not used by responsible lenders anyway. Further, the industry is quite highly regulated in various States and is also subject to many consumer protection laws.

Try these alternatives to cash advances and loans

Are cash advances really predatory in nature? That’s what several consumer groups say. They argue that these loans target blue-collar folks who are not very credit-worthy. They don’t have easy access to bank finance. Their take home pay is usually low and barely covers the essentials.

These groups say that payday lenders often have poor disclosure standards, high fees and that many consumers are not aware of the true costs of the borrowing arrangements they’re getting into.

Apart from that, consumer advocates say cash advance companies use oppressive collection practices. They end up trapping customers in a vicious cycle of ongoing payday debt that escalates costs and leads to an unmanageable burden on these families.

These are the basic arguments put forward by payday lenders. In the next post, we’ll look at the stand taken by cash advance companies.

10 things to check out about short term cash loans

Payday loans are immensely popular for several key reasons. They’re fast to obtain – you can have cash in your account the next day or sometimes even the same day.

Compared to borrowing from banks, cash advances can be obtained with much less hassle. You only need to produce a pay stub, your social security number and a bank statement, in many cases. That’s a breeze compared to going through the documentation process of most banks.

Best of all, even if you have a poor credit history, as long as you meet some simple criteria like having a job for at least three months, a certain (low) minimum take-home pay, etc, you will probably qualify for a cash advance. That’s why these loans are often considered sub-prime lending – a good percentage of borrowers would not be considered creditworthy by mainstream bank and other lenders.

Of course, there are many risks to being a habitual borrower of payday loans. Several are detailed in the posts on this blog – feel free to browse thru them and find out more.

More on short-term cash loans

It’s obvious that short-term cash advances companies represent one of the highest growth industries in America in recent times. They originally established themselves in fairly modest neighborhoods of big cities and rapidly grew to attain a national presence. So are the good times continuing to roll endlessly for payday lenders?
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This was a question someone asked about cash advances. The short answer is there is no security – this form of lending is unsecured. Payday loans are formally called deferred check presentment lending. This is a loan made basically on the strength of a post-dated check.
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Many consumer organizations allege that cash advance companies do not always provide a clear picture of the costs associated with a payday loan. And that oftentimes, customers are not aware of what they’re actually paying.
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One way cash advance companies justify their high APRs is by comparing it with the APRs (Annual Percentage Rate) you’ll incur on other options – like a bounced check, or late fees on credit cards.
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One reason why payday loans are popular is that these companies are willing to make very small value loans available – a loan can be as little as $100. If you approach a bank for a personal loan, you’ll typically find that they’re unwilling to make loans for amounts below $1000 - $1500 or so.
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If you must use payday loans and cash advances, at least make use of them in an appropriate manner. For starters, don’t treat them as a perpetual loan and avoid repaying the principal along with the charges. Some people do exactly that and find out that their obligations never end – the charges just keep piling on.
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Many cash advances companies claim that computing their charges as an APR (Annual Percentage Rate) does them an injustice. Their argument is that the money they provide is meant purely to tide over an emergency and is therefore more in the nature of a service than a loan. So, they say, rather than look at their charges in APR terms, look at those charges as a fee for services rendered.

In my opinion, this is a flawed argument. Here’s why.
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The payday loan dilemma

Most commentators – especially those from consumer organizations or government – agree that everyone is better off if they can avoid payday loans.

Therein lies the rub.
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You know what that is?

A cash cushion in your bank account! If you have a sufficiently large one, you’ll meet most emergencies without depending on cash advances.

Think about it this way. Every week, if you set aside the amount you pay in payday loan charges for just one year, you’ll have enough cash to get through many of “life’s little emergencies” (a phrase I’ve seen used repeatedly by many payday loan companies
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Take a look at all your debts. Determine which one costs the most. Write down your debt – outstanding amounts, interest rates, actual monthly payments – in declining order of interest rate (plus all other costs) charged.

Start with number one. For example, you might find that your most costly debt is credit card outstandings at say, 21% pa. You will now apply the 10% you saved to eliminating that debt first.
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This can go a long way in helping you avoid payday loans. Here’s a simple plan, which if you will execute in a disciplined manner, should see a substantial reduction in your debt in a reasonable period of time.

Get hold of receipts for six months. (If you don’t have them – start gathering them now. You can’t really guess at this stuff.)
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