Who Uses A Cash Advance?
Everybody gets in a situation where they need a cash advance from
time to time. It may be a family emergency, or it may be an automotive
repair that just can't wait. In those situations, there are companies
that are more than happy to help, for a fee of course.
If you get a loan with 21 percent interest, that's not considered
a very good rate by most people, and it probably reflects a poor credit rating,
or no credit rating. For instance, this is around the rate you might get on your
first car loan. This example is meant to give you some perspective, because some
of the cash advance companies offer rates even higher than 21 percent, and you
should go in with eyes wide open.
Many people who use paycheck advance services get caught in an unfortunate cycle.
Paying back one cash advance leaves them short on the next paycheck, so they
take out another cash advance loan. Each time they do this, they are paying out
something in loan fees, which adds to the cycle.
Use Cash Advances for Emergencies Only
For these reasons, it's a good idea to limit this kind of transaction to those
must-have situations. A car repair is something you probably need right away,
while a weekend in Las Vegas isn't. As with all of your finances, the best way
to approach this is to keep it in its place, and understand its purpose. It's
convenient to know that cash advances are available to you at any time, but you
also must learn to use them wisely.
Though you will sometimes need the cash advance in the short run, and for that
purpose it is wonderful, you should also include in your plans long range investments.
Even if you can't afford to invest in stocks or real estate, everyone can afford
to do simple things. For example, financial experts advise setting up a system
where every month you pay yourself, just as you would a bill, into an account
you don't touch.
Although it isn't always possible, 10 percent of your income is a very good place
to start. If you had an income of only $30,000, at the end of the year you would
have put away $3,000. Over the course of a few years, you would have begun to
build your wealth and could even open up the possibility of making bigger investments.
How a Payday Loan Works
So you need a loan just to get you through the week or so leading up to payday?
With just a paycheck stub from your job and an I.D., you can get cash the same
day. What you'll do is write a postdated check for the amount you wish to borrow,
which will then be cashed when your paycheck comes in.
The amount of money the loan service makes in this case is usually not expressed
as a percentage. It will usually be stated as a dollar amount based on how much
you borrow, such as $20 for every $100. It should be obvious you can figure out
this percentage, and as silly as it may seem, you should do so in order to have
an idea what the cash advance compares to other options.
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