Many people have a negative perception about payday cash advance loans. There has been a lot of media insurance for the last couple of years that seems to focus on on the negative points of these items without exploring the benefits conclusively. The bad press that the cash advance loan sector received and is still receiving is very much biased and should not be relied on. In this article we will look at the common faults that are highlighted and also stabilize the argument with the inherent advantages that the service provides to borrowers.
The first negative point that you learn about cash advance loans is that they are expensive. For a $1000 loan, you may be charged $50 following a month. These are normally the portion that cash advance loans go for. Rarely will a cash advance loan exceed $1500. The negative press will tell you that this mortgage is equivalent to a 60% p. a. loan from a bank if you look at it on a per annum basis. Although this is technically correct, it is a big mistake to value cash advance loans in this manner.
It really is first a mistake because cash advance loans are designed to be short term loans which are to be cleared in under a month. I have yet to see a case where someone takes out loan right after loan for a year. It basically does not happen in real life. If you look at it as a product that it is indeed to be, namely a loan with a period not exceeding one month, the interest rate is actually only 5%. If you look at it the proper way, these products are actually relatively inexpensive for the convenience they offer.
In the grand scheme of things, $50 to pay for emergency cash in your bank actually isn’t that expensive. For most of us $50 is certainly much more affordable than a damaging post on your credit statement. That is definitely cheaper than to have to pay for past due fees or to incur huge penalties just because you do not have to that extra little bit of money in your account to settle your outstanding debt. It is also cheaper in comparison to the face that you might lose from asking your friends or colleagues to lend you some money to keep your ends tied.
In addition to the “price” of cash advance loan products, the negative media has also focused on the rigidity of these products. We actually think that this is a benefit. The particular rigidity serves two purposes, the first and the most importantly is to enable companies to not have to go through severe and often times crippling rules that control larger lenders. With this, many smaller sized companies can be set-up and allows this service to be rendered to more people. The second purpose is to limit the exposure of clients to excessive interest rates. Although clients can request for a “roll-over” when they don’t have enough money to settle their own current tenure, it isn’t as easy to accomplish as most would think. It is to the lender to approve or drop the request and the borrower definitely has to make the request. There is no keeping quiet and hopping they will move it over for you.
There has been very much finger pointing that the cash advance loan market is also set up to take advantage of those who are in the lower income group. Although it may seem to be the case initially the true see is actually obscured by the fact that the biggest cash advance loan amounts are only $1500. It really is generally only the lower income groups that will need a loan of such a small amount. Increased income groups would generally need larger loans which cash advance loan companies simply cannot cater for. It is also proven there are higher incidences of financial mismanagement amongst the people of lower income organizations and this can also make it seem that will cash advance loan companies are trying to take advantage of all of them. The fact is that cash advance loan companies are offering a service and it is very much up to the consumer if they want to use it. The terms are clearly stated and are quite simple to understand unlike some loan items from larger finance institutions.
General, if cash advance loans are used in the way that they are intended to be, as a short term “cover” to tie loose ends they are certainly a product that is very useful and beneficial. It is only when the items are abused or used in a good incorrect manner that they will start to cause problems. This can be said about any financial product and should not be solely the fault of cash advance loans. It is certainly safe to use them, just be sure that you utilize them properly.