First, here is a simple but effective definition of cash advance loans – these loans are extremely short term, perhaps even just for a day. Normally, the lender advances the amount which is not a huge amount either – against the pay check. The borrower returns the money on payday. This kind of an advance is extremely useful for people who have a sudden requirement for money. There are quite a few lenders who will advance such cash loans to people. Credit cards are one such example. A credit card company for instance, will give the facility of credit limit to their client who can then withdraw a certain sum of money like a loan and from a regular ATM.
Thus, a cash advance loan is characterized by being
- Short term
- High interest and
These kinds of loans are governed by the Truth in Lending Act which requires the lender to tell the borrower exactly how much he is about to incur in terms of interest payments and other details like the interest rates for extension of payback period and so on. As a borrower of a cash advance, you should also insist on a written agreement and details of something called the annual percentage rate. Even though the term has the word “annual” in it, it will give you details on the interest for a short term loan as well.
You should also know about possible scams in cash advance loans. Unfortunately, there are plenty of instances where people have defrauded or attempted fraud on others. Even the fact that the borrower is in need of the money does not deter them. The Federal Trade Commission has brought out a list of indications that the company may actually be trying to scam you with a cash advance:
- Non disclosure – either partial or comprehensive – of all fees and charges involved.
- Lack of a physical address.
- Disinterest in your credit rating, ability to pay back or credit worthiness.
- A sales pitch that sounds too good to be true.
Some of the criteria that are applicable in order to get cash advance loans are that you have to be a US citizen and an adult. You also need to have some amount of job stability. For instance, having a job for more than the past 3 months is crucial. A cash advance can be given to someone who does not have a good or high credit rating. But your ability to pay back the same will need to be demonstrated. Banks typically, do not serve clients who have not shown the necessary wherewithal to pay back the loan. This underserved populace can approach a cash advance company instead.
In the USA, there are plenty of options for getting cash advance loans and the internet is probably a good source to scope out the possible options. It is good to do a bit of research on the company before you borrow from them and also check out the rates and terms and conditions being offered by other companies in the market too. This way, you will get a better handle on the actual costs of the loan.