An advance on your paycheck can be called many things, but are essentially the same type of cash advance. Popular names to describe a payday advance loan include; cash advance loan, check advance loan, post-dated check loan, paycheck loan, instant cash loan, deferred deposit check loan, and other names. All of these describe the same type of cash advance - a high interest, short term, small cash advance loan.
People should understand what a payday loan costs them. Under the Truth in Lending Act, the cost of any type of loan/credit, including a payday advance, must be disclosed to the consumer. A company is obligated to supply to you, in writing, the fee charge (finance charge) of the loan itself, as well as the APR (annual percentage rate). Both the fees paid and the APR on payday advances are extremely high. It is very expensive to borrow small amounts of money for a short term.
Payday advance loans are supplied by finance companies, check cashiers, and other businesses both online and at storefronts across America. The question many people ask is this: If a payday advance is so costly, why do so many people do it?
Accessing a payday cash advance brings no strings
attached (aside from the high price of the loan itself). Unlike a
home loan, that must be spent on a home, or a car loan, that must be
used to finance a vehicle, a payday loan can be used for anything.
When people are faced with needing fast cash, whether it be to buy
food or pay bills, and have no other means of acquiring money, a
payday advance may be the only obvious solution.
Are there alternatives to high priced, payday cash advances?
There may well be, depending on why you need fast
cash. Some suggestions include;
1) Check with your bank to find out if you qualify for overdraft
protection on your bank account. An overdraft can help you squeak by
until the next payday, and can also help you if you make an error
and use unavailable funds from your account. Always read through the
terms of an overdraft protection agreement before assuming one.
Overdraft interest typically is significantly lower than the
interest paid on a cash advance loan.
2) Sit down and budget. What exactly do you need a payday advance for? There are a variety of reasons why people choose to access fast cash at a high price. If your reasons include anything other than bare survival, the odds are good you don't really need it. Write down exactly what you need the money for, then assess whether you could survive until your next paycheck without it.
3) Approach your creditors. In situations where you need quick cash to pay a bill, for example, it is possible that a discussion with your debtor may lead to you gaining an extra few days or week to pay your bill. Many companies are more understanding than you may think. Always ask them to put your agreement in writing.
4) Think about every other possible way you can
access less expensive cash for the short term. Family and friends
may be willing to help you get by in the very short term, providing
the request is not made often.
If you feel there is no other possible solution to your cash
shortage than a payday loan, follow these guidelines;
1) Shop around. Consider carefully every aspect of any credit offer. Compare the APR and the finance charge. Also consider any other service charges, loan extension costs, and terms before selecting the company you deal with.
2) Only borrow from reputable companies. Whether borrowing from a business down the block, or applying for a payday loan online, ensure that you have the name, address, and telephone number of the company first. When applying online, carefully read through a company's security and privacy policies, and ensure that your personal information is being encrypted.
3) Make sure that you only borrow as much as you can realistically afford to pay back using your next paycheck, while leaving yourself enough money to get by until the following paycheck. One of the worst and most costly mistakes a person can make is putting themselves in the position where they end up taking a payday advance off every check, unable to catch up.
4) If you find yourself taking out more than one
payday loan over a period of a few weeks or months, seek
professional guidance and get help developing a budget for yourself.
Only with a solid saving and spending plan in place will you get out
of the vicious circle that short term loans can put you in.
Get answers to your most frequently asked questions about payday
advance loans here.
Payday Advances Resources:
Bankrate.com suggests alternatives to payday advance loans. Learn what fast money costs you.
