Archive for August, 2012
A cash advance is essentially a short-term loan. It is often used by individuals who need money quickly. Most cash advances have a high interest rate and it is beneficial to the person that takes out the loan to pay it back as quickly as possible.
The most common type of cash advance loans in the United Statesis a one on a credit card. Most major credit card companies will allow a card user to take out a cash advance up to a certain percentage of their total credit line. The interest on the advance is usually a much higher percentage than the usual rate for purchases on the card and usually payments made to the card will pay off the cash advance before any balance from purchases.
Most credit card companies will also charge a fee on top of the interest at the time of the advance. For example, if you request a $1,000 advance, you may see a charge on your next credit card bill for $1,020, which will includes the money you were given plus the additional fee you will need to pay. This ensures that the lender will make money on the cash advance even if the person requesting the loan pays it back quickly to avoid additional interest.
In addition to credit card companies, there are a number of other companies whose sole purpose is to offer short term cash advances people in need. The key difference with these companies compared to the credit card companies is that the loan has a set amount of time in which it must be paid off and cannot continue indefinitely without the loan applicant getting hit with additional fees.
People most often take out cash advances when they are hit with unexpected expenses. Their car broke down. They fell sick and have a large doctor’s bill that their insurance will not pay. It can also be used to pay off another bill that is due to avoid a large late fee that might cost the person more money than paying the interest on the cash advance. During an emergency like this, a cash advance may be the only option available to someone.
When people are in need of money, they will often assume that the traditional loan programs of the large, multinational banks are their only option. Even those who know about the alternative of payday loans do not know enough about the ins and outs of the different options to make the best choice.
One of the most important aspects of any loan, but especially payday loans, is the percentage rate of interest that you will be required to pay back. Although the term period on payday loans is much shorter than on other types of loans, the interest rate can make a big difference in how much of your paycheck will go to your loaning officer and how much will stay in your pocket.
Although you can actually find the going market rate that is relevant to the current economic market, many people do not know where to find these resources. Also, many people think that they must stick to their local area when it comes to payday loan companies. Both things are absolutely essential to getting the best deal when it comes to a payday loan.
For those who need to view websites that compare the percentage rates of payday loans, you can easily find them through a simple search on a major search engine. It is definitely a strong tool, but not as strong as expanding your reach from your local area to the realm of online payday loaning.
There are many different aspects of a payday loan that will affect the percentage rate that you pay, from the term period that you borrow the money to the going market rate. The term period is an especially important aspect of the amount of money that will be required of you in interest, but it is not the only one.
You can expect any number of rates depending on the type of payday loans company that you go to. You will usually find the cheapest rates online because there is more competition there; however, your local payday loans company may actually win out because of the convenience and comfort factor.
Payday loans have grown in popularity over the past four years, despite the fact that these loans often come with large interest rates. As traditional banks have tightened their lending standards, many people have been forced to use payday lenders instead of a credit card or home equity line of credit.
Payday loans typically start when a customer or borrower writes a post-dated check to the payday lender. The lender then issues cash, minus a service fee, for the amount on the check. When the date written on the check arrives, the payday lender cashes the check.
If there are not enough funds available for the check to be cashed, however, the borrower must take out another payday loan. This new loan costs a new service fee. This cycle can continue forever until the borrower manages to come up with the funds to pay back the original loan.
The cost of these service fees varies, but studies have shown that if a customer has to pay a service fee every two weeks, the amount of money that he or she will pay to service the loan will be equivalent to that person paying around 450% interest on the loan. While new banking regulations have brought this amount down to 30% in some areas, this is still some of the highest interest debt that a person can take on.
For this reason, it is important for people who are considering taking out a payday loan to make sure that they can pay the loan back on time. In general, a payday loan company is not allowed to charge more than 30% of the total amount loan in fees. This means that a loan of $500 could not have a service charge of more than $150. In many states, the fees are even less. By paying off the loan on time, the amount paid in fees will be high, but it will not cost the thousands of dollars that these loans can cost a consumer.
When possible, avoid payday loans, but if you absolutely have to have a loan, make it a priority to get the payday loan paid off quickly.
Although most people may have a general understanding that a loan is money borrowed from someone else with an agreement to pay that money back within a specified period of time, many people are in financial trouble today because they simply do not understand the nuances of the concept of a loan and the many different types of loans that may be procured from different sources.
Below this article will discuss some of the different types of loans available as well as some of the different avenues that people may use to obtain loans.
One – The “traditional” loan
Although the word “traditional” may actually be a misnomer, the general concept when most people think of a loan involves a large bank. Multinational banks have the most money to advertise their loan services, so when most people think of a loan, they will naturally equate that to a multinational bank.
What many people do not know is that a traditional loan may not be in their best interests. Because they are unaware of the different types of loan packages that they are eligible to receive, they assume that the large bank is the only game in town.
In fact, a large bank tends to be quite impersonal when it comes to loans for small business people and individuals. Large banks are best for large businesses with large timelines and large sums of money saved up to protect themselves from loan default.
Two – The payday loan
A payday loan is a short term loan usually given by a business which specializes in such loans. Payday loans usually do not have to be backed by any collateral except the knowledge that the borrower has a job and will be able to pay back the loan within a specified period of time.
Payday loans often have high interest rates, but the term is usually so short that the actual cash payout because of the interest is nominal.
Three – The car title loan
A car title loan is a type of short term loan in which the collateral used to securitize the loan is a vehicle. Usually a car title company will allow the borrower to keep the vehicle in his or her possession during the term of the loan, taking possession of only the title of the car.
Four – Second mortgages
Many people also use the equity in their house as a sort of bank. Banks are usually happy to let you borrow money against the accumulated value of equity in a home. This type of loan, although it may be different because of the structure, is usually known as a second mortgage.