Payday Advance: What Are The Downsides to Them?

Scrambling for money to pay a bill is a practice that is all too common among some people. Just when you think you have your money in order, a problem occurs. A payday advance loan is one of the options available; however, you should consider what some of the negatives are to these loans as well.

Risking Your Credit Score
As with any loan, you need to pay back a payday loan in full. The exact amount of time you have to do so will vary by provider. While you may think that you’ll have the money in just a couple of weeks, new financial circumstances could wreck havoc on your life by then. If you find yourself unable to pay back the loan, your credit scores could plummet. Then, you’ll be in a worse financial state than you were before.

Length of Time to Pay Back The Loan
While it has already been noted that different providers will vary with the time they give you to pay back the loan, you usually do not have a huge amount of time. With a payday loan, a few weeks is a fairly common time frame that you will be given to pay back the loan. This can prove very challenging for people who are already struggling with their finances.

High Interest Rates
Whenever you take out a loan, you are going to be charged interest rates. The amount of interest that you need to pay can depend upon your credit scores, market rates and the individual lender. In any case, interest rates mean that you are, essentially, paying back more money than you borrowed. With payday loans, this sum can be a majorly significant one as they tend to have interest rates on the higher end.

Not Covering Your Full Needs
Also, you generally cannot take out a huge sum of money with a payday loan. If, for example, you are short on your mortgage, a decent chance exists that a payday loan is not going to cover that amount. This means that you will have to take more money out from another lender, and then you’ll end up having to pay back two loans with interest rates. Checking with your local providers to see how much they can offer is necessary before you even consider a payday loan as a possibility.

Little Trust in The Lender
Of course, a number of reputable and honest payday advance entities do exist in the United States. Still though, other ones just cannot be trusted. They might have loose policies that do not work out in the best interest for you in the long run, or they may charge you higher interest rates than necessary. When it comes to your money, you always want to be sure you are using the services of reputable providers.

Payday advance loans can bring benefits to you when you are in a difficult financial situation, but failure to pay attention to the negatives is a huge and often costly mistake.

Cash advance loans – better than an overdraft?

Introduction

Alternative financing products may be ideal for individuals who need money in a hurry. If unexpected expenses have toppled a household budget, a short-term solution might ease some financial pain. Cash advance loans have enabled many borrowers to make ends meet until their next pay period.

Benefits of a Cash Advance Loan

A cash advance loan has fewer requirements than traditional banking products. Large banking institutions and consumer financing companies usually require favorable credit scores and certain income qualifications. However, payday lenders will usually ignore bad credit profiles. A greater emphasis is directed toward a borrower’s payroll earnings. Payday lenders may issue a cash advance loan to help a borrower with a financial hardship. Generally, repayment of the money is expected on the borrower’s next payroll period. If a borrower is unable to payoff the cash advance loan, the payday lender might make arrangements to extend the financing period.

Overdraft Against a Personal Checking Account

A banking customer with a checking account generally has the ability to present a paper check for the purchase of various goods or services. The banking relationship could reduce the need for a consumer to tote large amounts of cash. Typically, a bank earns interest from funds that clients have deposited. An overdraft occurs when the dollar amount of checks written exceeds the available funds within a customer’s bank account.

Instead of processing a typical transaction, a bank must perform additional steps to address an overdraft. A notice is sent to the account holder to indicate that a financial deficiency exists within their checking account. Additionally, most banks will assess the account holder a returned check fee. Overdraft fees vary among financial institutions, but a range from $30 to $40 is commonly realized. In some cases, a merchant might represent a returned check that results in an additional overdraft fee to the account holder.

A single overdraft fee could create a domino effect for a consumer’s checking account. For example, an unexpected overdraft fee could cause a $10 purchase to get returned for insufficient funds. Additional overdraft charges might cause a consumer’s account to spiral out of control. A bank might demand swift actions to resolve an unbalanced checking account. Failure to pay overdraft fees will likely prompt a bank to close a consumer’s checking account.

Summary

For a short-term emergency, cash advance loans are better than an overdraft. The loan terms are very straightforward and easy to understand. Overdraft fees can immediately impact a consumer’s finances as well as any pending payments made with a personal check. Contact a payday lender to learn more about cash advance loan products.