Reasons Why You Might Decide On a Cash Advance Loan
Wage advance loans are often touted as a fast solution for a bad financial situation, letting you bridge the gap between rounning out of cash and your next paycheck. The basic idea is that you can borrow a small amount of cash for a short period of a week or two, and pay back the debt at your next pay day.
This form of service can indeed be very appropriate if you’ve not got any money for living expenses, or if you’re surprised by an unexpected bill or expense that you simply can’t meet when you need to, but are pay day loans always the helpful option they’re presented as?
First, we’ll take a look at the incontestable advantages of these loans, before looking at the disadvantages, and possible alternative options you may be able to utilise if you make up your mind a fast cash loan isn’t right for you.
The lending criteria for wage advance loans are very generous indeed, and nearly anyone who’s got a job and has a suitable bank account will in all likelihood have their application approved. This means that even people with bad credit scores should be able to get a payday loan, even after being turned down for nearly any other kind of finance.
They are also simple to sort out, and you can often get the money in your bank account quickly. Some lenders can even arrange an overnight transfer of the funds straight into your account the next working day, which is patently very handy when you need cash without delay.
Finally, once you’ve been sanctioned for your first loan, it’s usually a very easy matter to ‘refresh’ your loan again if you find you need to make use of the facility if funds are again short in the future.
There are, all the same, two substantial downsides to payday loans which you rarely come across in the advertizing and web sites furthering them. Firstly, they’re hugely expensive compared to other forms of borrowing. Because the term of the loan is so short, a fee of 20% of the advance – which is more or less average – will work out to be an eye-wateringly high APR.
The second problem is related to the first: because they’re so expensive, you can easily be left short of money the next month once you’ve cleared the loan and paid the charges. In this scenario, it’s just too easy to refresh your loan again to cover the deficit, resulting in more fees, and a permanent cycle of borrowing.
So, if you resolve that a payday loan isn’t a good choice for you, what choices do you have? The first one is making use of a credit card, if you have one. While credit cards are usually also fairly expensive types of credit, they do allow you to extend the debt over a number of months rather than needing to be repaid straight away along with a charge.
Many banks now feature an overdraft facility, which can also be used to tide you over a temporary lack of money. The interest rate on an agreed overdraft is likely to be better than that of a credit card, but your bank might not approve your application. Beware of going ahead and overdrawing without your bank’s authorisation, as the charges they will impose in this case will be very expensive.
If neither of these options is open to you, and you have no other way of getting hold of money such as borrowing off family, then a payday loan may be the best option. Just make certain that you use it properly, and listen to the warning sign it’s giving you about the longer term state of your financial life.
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