Myths About Cash Advances

Posted on Tuesday, August 31st, 2010 at 10:58 am in Helpful Payday Loan Info, Miscellaneous Cash Loan Info

There is some bad press and misconceptions floating around about cash advances and payday loans. We’re here to set the record straight about the many benefits of cash advances online. Cash advances help consumers in a financial pinch with low fees, flexible payment plans, and no credit check for instant 1-hour approval. Below are three common cash advance misconceptions and the truth about how cash advance payday loans can benefit consumers in a pinch.

First Myth: Payday lenders prey on the poor and financially desperate.
Actually, the average cash advance customer is college educated, employed full-time, and earns a yearly salary of about $40,000. Cash advances have gained popularity with middle-class consumers who sometimes need extra cash to make ends meet.

Some months can be more demanding on your finances than others. A smaller paycheck, a higher utility bill, or an unexpected emergency is all it takes to send your finances temporarily out of control. Borrowing a cash advance can see you through until payday during more challenging months.

Second Myth: Cash advances trap borrowers in a cycle of payday loan debt.
Cash advances can be helpful or harmful depending on the financial health of the customer borrowing them. Some cash advance customers with existing debt trouble turn into chronic borrowers and never seem to pay off their cash advance loans. Other customers who borrow cash advances for emergencies or a short-term financial fix pay off their debt easily at the end of the month. The amount of personal debt a cash advance creates depends on the individual and his or her existing financial health.

Third Myth: Cash advances are too expensive with high interest rates.
Cash advances are approved based on salaries, not credit scores, and pose a bigger risk to the lender for their convenience and accessibility. Because of their higher lending risk, cash advance interest rates are typically higher than credit-based bank lending services. Rates and service fees vary from payday lender to payday lender, but a typical cash advance has a $15 service fee for every $100 borrowed. A $100 cash advance borrowed for two weeks with a $15 service fee has an annual percentage rate (APR) of 391%. It’s important to remember though that a customer will only see a 391% APR if the cash advance is repaid in monthly installments over a full year.

Critics may call this a high APR, and it is higher than the rates you would get from a personal bank loan or a credit card, which are both approved based on the applicant’s credit score. However, for people with bad credit or who need cash fast and don’t have time to wait for credit-based approval from the bank, cash advances have a much lower APR than late fees on missed bill payments or bank overdraft fees, which carry APRs of 1,000% and higher even if you’re overdrawn by only a few dollars. Cash advances are a more affordable option when you need cash fast for emergency spending.

Don’t let the critics fool you. Affordable cash advances and payday loans are available from online payday lenders for all of your fast cash needs.

Related posts:

1. Cash Advance & Payday Loan Myths
2. Instant Payday Loan Myths
3. Common Payday Loan Myths
4. Cash Advance Reforms
5. Cash Advance Fees & Interest Rates