There’s always the temptation to avail yourself of cash advances either from banks or from your credit card issuers, if you have one. They provide a ready fallback to let you maintain the lifestyle you have been used to, or tide you over an emergency you never saved-up for. Paday loans are meant to bridge between paydays when you find yourself in a tight financial bind that couldn’t wait for the next payday. Bust just like credit card advances, they exact interest rates that can be a real burden later on.
It comes with high interest rates
Short term payday-loans can be misleading when they offer you enticing interest loans for a short period of time. A 5% interest on a loan that will mature in one month means 5% x 12 or 60% Annual Percentage Rate or APR. That’s a lot when you consider that prevailing interbank lending rates are just 6% to 7% per year.
Lenders know their math well and they are in the business of lending money. It takes the same amount of effort, time and operating cost to process a $100 loan as it is a $100,000 loan. And on top of that, using the same interest rates applied on large amounts will not prove profitable when lending out small amounts on short maturity periods of less than a month. This is not a $100 million loan extended between banks, corporations or even nations, where even a 10% per annum interest charge can already bankroll the lender’s entire operations. We’re talking just a few hundreds here.
It’s great that many states regulate lending interests. And that you as a consumer can get loans from states that do even if you reside in a state that don’t.
Common Features of Lenders
With a growing need for instant online-cash-advance, the market becomes highly competitive with a slew of lenders slugging each other out for the revenue streams that are sure to come in with loan interest. Here are a few competitive features surfacing on the net:
* A fast, convenient and easy lending process is a come-on in most lending firms on the net. It is quite common to see customers apply, get approved and receive their cash either within or next working day through a fund transfer facility with their banks.
* Late processing is another feature where you can apply for a cash loan even as late 10pm CST. Once approved, you get the cash next working day.
* 24-hour loan processing or Weekend and Holiday processing. You can never predict when emergency strikes and they do not distinguish between holidays and business days. Some lending firms allow you to apply on weekends and holidays and receive your cash on the first business day after the holiday. On weekend application, you get it on the following Monday.
* You may renew loans on the fly with just the interest and processing fees deducted from your loan proceed.
Be very much aware of the risks you are taking when availing of instant cash loans. Weigh the pros and cons. You might be better off paying late payment surcharges or reconnection fees on your utility if they cost lower than paying for a loan’s interest. But hen you have arrears to contend with, a loan to clear them up can be the best option to take.