Cash Advance Fees & Interest Rates

Posted on Saturday, August 28th, 2010 at 11:29 am in Helpful Payday Loan Info, Miscellaneous Cash Loan Info

Payday loans and cash advances online extend a valuable cash and credit service to customers who need fast cash even with bad credit. A typical cash advance customer pays about $15 to borrow $100. Cash advance interest rates are low considering the high risk to the payday lender with no credit check. Convenience isn’t always free, but low interest cash advances make fast cash affordable for most consumers.

Critics frequently cite triple-digit annual percentage rates (APR) as the cash advance industry’s #1 disadvantage. APR is not an accurate measure of a payday loan’s value, since customers pay back their borrowed cash in two week to one month and not a full year. Financial institutions use APR to help consumers compare the costs of long-term lending services like personal loans, credit cards, or mortgages. Cash advances are short-term loans and can’t be effectively compared with long-term lending using APR.

Even so, consider the APR on a typical $100 cash advance borrowed for 14 days with a $15 service fee. The APR calculates to 391%. While this figure is higher than credit-based bank lending services, it’s about one-third less expensive than a bank overdraft fee on a checking account overdrawn by $100 for the same 14 days. Most customers borrow cash advances online to replenish their bank accounts before payday and avoid overdraft fees, or to have enough cash to pay their bills on time without late fees which can carry even higher APRs than an overdraft.

Payday loan lenders do not run a credit check to approve a cash advance. Unlike bank loans that are approved based on a consumer’s credit score, cash advances are approved based on the customer’s monthly salary. Bank lenders examine credit histories to determine a borrower’s risk and likelihood to pay on time. Because your credit score vouches for your trustworthiness as a borrower, the interest rates on bank loan services are generally low. Payday lenders don’t use this same assurance of credit worthiness, so interest rates tend to be a little higher and reasonably so. Payday lenders must compensate for their lending risk to offer fast, convenient cash to customers with bad credit.

Don’t fall for the negative hype surrounding online cash advances and payday loans. Research a low cost cash advance lender for yourself and see how affordable fast cash can be.

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4. Payday Loan Interest Rates
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