Why Cash Advance Loans Are So Costly
Cash Advance Loans can be a very useful service for those who have an urgent need for instant money to tide them over until their next payday arrives. Whether this is down to a problem with cashflow, or an unanticipated bill, wage advance loans can help bridge the gap.
Payday loans come at a cost though – and it’s a high one. Wage advance loans are commonly regarded as one of the most overpriced forms of legal finance out there, with huge rates of 1000% or more commonplace. Why are the charges so high?
The first consideration to highlight is that cash advance loans are borrowed over a fairly short time period, while the standard APR measurement of interest charges is designed for quantifying how much interest would be paid over an entire year. As few cash advances are borrowed for this long, APR figures are maybe not the safest way of measuring how expensive they are in real life situations.
Nonetheless, the costs are significant. You’re paying for convenience and speed, as most loans can be placed in your bank within 24 hours, and also because of the lack of credit checks you’re also in some senses paying for the risks taken by the lender who may advance money to individuals totally unable to repay it.
You’re also paying a larger amount because the finance companies know that customers who need cash urgently are happy to pay more than those looking for longer term finance and are prepared to shop around for a less expensive deal.
It is this final reason that is the fundamental one wage advance loans are so costly – as an industry, payday loan companies recognize that they are the lenders of last resort, and so can afford jointly to charge high prices for their doubtless popular services.
Processing your request, Please wait....
