Reasons Why You Might Make Use of a Payday Advance Loan
Cash advance loans are often suggested as a quick cure for a poor financial situation, letting you bridge the gap between running out of money and your next payday. Simply put, you can borrow a small sum of money for a short time of a week or two, and pay back the debt at your next pay day.
This kind of facility can indeed be very handy if you've run out of money for day to day living expenses, or if you've been hit with an unexpected charge or expense that you simply can't cover when you need to, but are cash advances always the good choice they're promoted as?
To start with, we'll take a look at the undisputable plus points of these loans, before looking at the problems, and possible other choices you may be able to use if you decide a payday loan isn't a good choice for you.
The lending criteria for pay day loans are very generous indeed, and nearly anyone who's in employment and has a suitable bank account will probably have their loan application accepted. This means that even people with bad credit scores should be able to get a payday loan, even after being rejected for nearly any other type of credit.
They are also easy to arrange, and you can oftentimes get the funds in your account very quickly. Some payday loan companies can even set up an overnight transfer of the money straight into your bank account the very next day, which is plainly very useful when you need cash without delay.
Last, once you've been accepted for your first loan, it's usually a very easy matter to 'roll over' your loan again if you find you need to make use of the facility if money is again short in the future.
There are, even so, two large disadvantages to wage advance loans which you seldom see mentioned in the advertisements and web sites pushing them. Firstly, they're massively pricey in comparison to other kinds of borrowing. Because the lending period of the loan is so short, a fee of 20% of the amount you borrow - which is roughly average - will work out to be an extremely high APR.
The second drawback is often a result of the first: because they're so expensive, you can easily be left lacking funds the following month once you've repaid the loan and paid the charges. In this scenario, it's simply too easy to refresh your loan again to cover the shortage, resulting in more charges, and a never ending cycle of debt.
Therefore, if you decide that a payday loan isn't a good choice for you, what choices do you have? The first one is borrowing on a credit card, if you carry one. While credit cards are usually also quite pricey kinds of credit, they do allow you to extend the debt over a a period of months rather than needing to be paid back immediately along with a fee.
Many bank accounts now offer an overdraft option, which can also be used to cover a temporary lack of money. The interest rate on an authorised overdraft is likely to be better than that of a credit card, but your bank might not approve your application. Be careful about going ahead and overdrawing without your bank's authorisation, as the fees they will levy in this case will be very expensive.
If none of these options is open to you, and you have no other way of acquiring money such as borrowing off family, then a payday loan may be the best alternative. Just make sure that you use it correctly, and listen to the warning it's giving you about the longer term condition of your finances.
Martin writes for a payday loans provider in the UK, and you can read more about the pros and cons of cash advances at his site as well as applying online.