You hear about a cash advance being expensive, but have you ever really looked at what gets charged and how much it affects your finances? Let’s take a look at an average cash advance where the borrower received $200.
Most cash advance loan terms average two weeks.
On average, a short-term loan company will try to schedule a payoff around your next paycheck or on average 14 days later. Due dates are set around direct deposits to help promote authentic payments. When a company debits the bank account it helps to have money in there to cover the cost. If money is not in the account, not only will there be a fee attached to the lender, but a bank overdraft fee will also be charged toward your account. Another $50 in fees is
Hopefully you started off in the right direction by working with a lender that does not charge an application fee. Where you aware that these fees even exist? On average, some lenders will deduct $30 from your bank account just for screening the application. This means that the company can deny your loan request and still make $30 off of your attempt to get some emergency cash. Protect your bank account and call a company before sending in an application.
What happens when you apply and receive a $200 cash advance?
The average charge for a payday loan is 35%. Many states cap this amount and will not a lender to charge more. For those states which do not carry regulations, there are larger interest charges. If a person takes out a loan for $200, the original payoff date will be set in or around 14 days. The full payment required will be $270. This represents $35 for each $100 borrowed. Your minimum requirement is $70, the fees in full. If you cannot to pay down on your loan, the full loan amount will roll over for the next 14 days and the $70 will be reattached as a minimum fee.
Word of caution to protect you from some cash advance lender policies
The terms and conditions are supposed to disclose any potential fees throughout the course of a loan. there are times that “other” fees are listed in super fine print elsewhere on the page. In other words, some charges won’t be in front and easily recognized. There are companies which will raise their interest rates after the original due date. Other companies will expect a higher minimum payment after 3 rollovers. The additional payment will be used to pay down the loan principle which in reality is a good thing. When a customer is unaware of the minimum increase, it could mean a bad thing for other budgeted costs.
How much will your loan cost you? If the company has no “extra” or “hidden” costs, just a 35% interest rate then you could pay off your loan for $270 on the first due date. If you need an extra pay period, the additional interest will raise your full cost to $340. Take another pay period to pay it off, and the total cost climbs to $410. You have now doubled the loan amount to be paid off in less than two months.
A cash advance is cost effective when it can be paid off on the original due date. It takes some research by the borrower to seek out a lender which has lower than average rates and will not charge extra for the application nor will the interest rate hike up after the original due date goes by. Shop for responsible lenders, your bank account will thank you later.
