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Should You Decide On a Cash Advance |
| Date Added: June 21, 2011 03:20:18 PM |
| Author: Martin Sumner |
| Category: Money & Finance |
| Pay day loans are often suggested as a fast solution for a tough financial situation, letting you get through the time between running out of money and your next pay day. The basic idea is that you can borrow a small sum of money for a short time of a week or so, and repay the loan at your next pay day. This sort of service can actually be quite handy if you've got no money for day to day living expenses, or if you've been hit with an unanticipated bill or expense that you just can't cover when you need to, but are payday loans always the good choice they're described as? First, we'll take a look at the indisputable plus points of these loans, before looking at the disadvantages, and possible alternatives you may be able to use if you decide a fast cash loan isn't right for you. The lending criteria for payday loans are really quite lax, and nearly anyone who's working and has a suitable bank facility will in all probability have their application approved. This means that even people with poor credit scores should be able to be approved for a payday loan, even after being rejected for nearly any other sort of credit. They are also simple to arrange, and you can frequently get the advance in your account in a matter of days. Some providers can even arrange an overnight transfer of the funds straight into your account the next working day, which is patently very useful when you need cash without delay. Finally, once you've been approved for your first loan, it's usually a very simple matter to 'renew' your loan again if you find you need to make use of the facility if funds are again short in the future. There are, even so, two substantial disadvantages to wage advance loans which you rarely come across in the advertisements and web sites pushing them. Firstly, they're hugely pricy compared to other kinds of credit. Because the lending period of the loan is so short, a charge of 20% of the amount you borrow - which is roughly standard - will result in an eye-wateringly high APR. The second drawback is closely related: because they're so pricey, you can easily be left short of money the following month once you've cleared the loan and paid the fee. In this scenario, it's simply too easy to renew your loan again to cover the shortfall, resulting in more fees, and a permanent cycle of borrowing. Therefore, if you decide that a payday loan isn't the right option for you, what options do you have? The first one is making use of a credit card, if you carry one. While credit cards are normally also pretty pricey forms of finance, they do allow you to spread the debt over a number of months rather than needing to be payed back immediately along with a fee. Many banks now offer an overdraft facility, which can also be used to cover 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 may not approve your application. Beware of going ahead and overdrawing without your bank's agreement, as the interest they will levy in this case will be punitive. If neither of these options is viable for 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 alternative. Just be 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. |