Month: August 2020

20/08/2020

Cash Advance vs. Payday Loans Bad Credit

If you need some cash and you need it right now, chances are that you’ve only got a few choices. You might be able to borrow the money from friends or family. If that’s an option, go for it. You’ll be much better off in the long run if you’re able to borrow the money with little or no interest, and pay it back on a reasonable timetable. Unfortunately, not everyone has family or friends to turn to in a time of financial crisis.

Two of the options that people sometimes find themselves facing are cash advances on their credit cards and bad credit payday loans. To know which is better, it’s important to understand how each works and what fees are involved.

Credit Card Cash Advance

The first solution to the cash crunch you might consider is an advance from your credit card. The way a cash advance works is that you get money from your credit card company, usually via a bank or an ATM. The bank or ATM will usually charge you some sort of a fee, which may or may not be billed to the credit card company.
Cash Advance vs. Payday Loans Bad Credit

In addition, you’ll have to pay a fee to your credit card company for the cash advance itself. In some cases, this can be as much as $25 just for one cash advance. In other cases, it’s a certain percentage of the cash advance, usually with a certain minimum fee.

Finally, you’ll have interest charges. Once you’ve taken the money in a cash advance, you’ll have interest charges from then on out. The sooner you pay off the cash advance balance on your credit card, the less you’ll pay in fees.

Payday loans

Payday loans are different entirely. With a payday loan, you write a check to a payday lender in exchange for cash today. The amount of the check is going to be higher than the amount of cash you get. This is to cover the fees involved in the payday loan.

The payday lender then holds the check until an agreed-upon date, at which point they cash the check. If you can’t cover the check at that time, you may need to visit the payday lender and take out another loan, along with another fee.

Which is Better?

It really depends on your situation. If you’re certain you can pay back the money within a couple of weeks, a payday loan can be less expensive than a cash advance on your credit card. On the other hand, if you renew your payday loan just once, chances are pretty good you’re going to be paying more in fees than you would with your cash advance.…

06/08/2020

Are Payday Loans Dangerous?

Payday loans stir up quite a controversy in some circles. To hear some people tell the tale, payday lenders are little more than mafia-backed loan sharks who are out to take advantage of you in your most desperate time of need.

Still, there are those that claim payday loans are a valuable and necessary service. Traditional financial institutions typically aren’t willing to make small, short-term loans to people, especially when their credit is a little bit shaky. So, people turn to payday loans to fix their short-term financial needs.
Are Payday Loans Dangerous?
How they work

A payday loan is a short-term loan. The lender provides you with cash today in exchange for a check dated into the future – typically two weeks. You provide the lender with some form of income verification. The amount that you get back in cash is less than the amount of the check you write, because the check includes the payday loan fees.

So, for example, you might take out a payday loan of $200. You write the check for $235, and it’s cashed in two weeks after you’ve been paid.

What’s wrong with this?

Unfortunately, the short term fix may have long term financial consequences. The terms on a payday loan are significantly worse that the terms on other types of credit. The annual percentage rate (APR) of a payday loan can reach up to 400 percent or more in some places, and is typically at least 250 percent. This puts payday loan interest rates somewhere between 10 and 40 times the rate of a more traditional type of credit.

Even that in itself isn’t always bad for the borrower. The problem comes when the borrower doesn’t have enough money in her account to cover the check that she wrote.

What the borrower then has to do is go back to the payday lender, who is usually willing to give them another loan – complete with another fee. As you can imagine, at a fee of $35 every two weeks the interest on that $200 can add up extremely fast. In fact, you’re looking at an interest rate over 450 percent.

The solution

The solution to payday loans isn’t to shut the businesses down, however. It’s to find other forms of short-term and low-value credit. Whether it’s micro loans, peer-to-peer lending or even borrowing money from your uncle Joe, there are a number of ways to avoid the payday loan jam.…