How does a cash advance lender get away with promoting a short-term high interest loan as a low fee cash advance alternative financial solution? It all starts with a look into what extra costs a consumer must pay no matter what third party money is used. The most well-known fee is interest. When interest is associated with a loan advance, the last description anyone would offer is low cost. Where does the term come from?
What is low cost about a cash advance?
As a short-term loan is not initially placed into a low cost category, it definitely has its moments of glory.
- On average, a customer will pay $30 per $100 loan. If you are looking at a bank overdraft fee of $35 or a late credit card payment fee of similar value, then you could protect your bank account with $200 cash advance for less money. If you are one who racks up multiple bank or creditor fees, the savings is immense.
- The high interest for these loans does not begin until after the initial payoff date. If you pay off your loan on or prior to the original due date, your money will not have accrued any interest.
- There are companies who carry no hidden fees. You will need to do your homework, but these lenders do exist. There is no reason to pay set-up fees or application fees when low cost advance lenders do it the right way.
When you use third party money, expect to pay a fee, but don’t let any of them rip you off. Cash advance lenders are not alone in this category. We have seen reports of banks and credit unions using their own tactics to reap financial gains from their customers. Remember what used to be a “free checking account?” The most difficult piece for a consumer is separating the good apples from the bad. This is where comparative shopping and talking to your friends and family becomes helpful.
A low cost cash advance can switch to a high cost loan in one fell swoop.
All it takes is one more unexpected cost or outspending one budgeted category to put the payoff on the back burner. When this happens, that high interest comes into play and interferes with what was an easy payoff. A lender will expect the borrower to at least pay the fees each term. This means that every two weeks, that interest rate will be charged towards the remaining balance. If you never make payments against the principle balance, that loan remains a thorn in your wallet.
Paying off a cash advance is a struggle for many. Using it to fulfill cost of living expenses is not a suggested usage. When someone is already struggling paycheck to paycheck, obtaining fast cash will only solve the problem for today while making larger problems for tomorrow. Use a short-term loan when it is going to be a low cost alternative. Know when your payment is due and especially where the money to pay for it will come from. Find another solution for your finances when this option is not cost effective.
