A cash advance is a small loan which is given for a short period of time. It will typically have a limit of about $1,500, and most companies will not require credit checks. Many people who take out cash advances do so to have money between paychecks. The loan will normally be given in cash and will be secured by a post-dated check. On the date that the payday loan is supposed to be paid back, the lender will try to withdraw money from the borrowers account using the check.
Most payday loan companies operate in small shops, but they are often funded by larger financial institutions such as banks. Many banks also offer a similar service which is known as a direct deposit advance. The advantage of cash advance companies is that they cater to people who can often not borrow money from banks due to bad credit or other issues. Because some people have bad credit, banks consider them to be a risk and will not loan them money. However, this have left open a large market which payday loan companies have tapped into. A good website which has information on cash advances can be found at www.advanceloan.net.
There are a number of different services which offer cash advances, and these include pawn shops. Many companies will hold title to your car or another valuable piece of property until the loan is paid in full. As the use of the internet continues to increase, many people are now getting payday loans online as well. While these loans are convenient, they have been the subject of controversy. They are well known for their high interest rates, which could be as high as 240% APR. While this may sound high, it is measured in two weeks, or the time required for borrowers to pay back the loan.
Because of these high interest rates, the cash advance company is always guaranteed to get back more money than it loans out. Even if the borrower decides not to pay, the company can run the check through their bank account and cause it to be overdrawn. The borrower will then owe money to both the bank and cash advance company. Many people who take out these loans get into what is called a "vicious cycle," where they loan money between paychecks, and are forced to pay it back when they get paid from their jobs. Because they don't have any money once they pay back the loan, they are forced to take out another payday loan.
Banks have also been heavily criticized for funding payday loan companies, while simultaneous rejecting the same customers who come into their own offices to get loans. It appears to many that the bank is trying to profit off a growing industry while simultaneously protecting their own assets against losses. Despite the criticism which has been directed at the cash advance industry, it continues to prosper. These loans should only be used when you absolutely need them. Many people who use payday loans become dependent on them, and it is important to be responsible when managing your finances.
ABOUT AUTHOR:
Ameet Arurkar is the Founder President of Stargate Holdings Inc. He has served as the President of Valvola Corporation and the Managing Director of Intelisys India Ltd and has an experience of over 8 years in www.karichat.com“>Web Application Software and Ebusiness. |
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