Banks are Struggling to Lend. Cash Advances Become More Popular

Cash Advances are quick

Cash advances are being relied upon by consumers as they try to make it through their monthly bills. A cash advance can pay for overwhelming debt or an emergency bill because it is quick and easy. Most lending companies for these types of loans make the application process as simple as possible. If you are employed, are over 18 and have an active bank account, you can apply for the loan. The lender will look into approval and calculate how much you are eligible to receive. If a company ultimately approves you, your funds are deposited into your account within 48 hours, sometimes sooner.

Why not banks?

The simplicity of this type of loan is gaining momentum because normal lenders are no longer available to Americans. The recent bailout is proof that the economy is suffering and it’s estimated to be over a year before citizens feel some relief from the pressure.

The condition of U.S. banks

It’s been a year since U.S. banks first began having major financial issues. This year profits have been growing, which is good news, however analysts caution that it isn’t completely indicative of an economy that is out of hot water. A lot of the “ups” of the banking economy translate to banks suffering the “smallest losses” they have experienced in months. So while they are doing better, they still aren’t performing at the same level they were in prior years.

Critics also warn that although banks may be on top regarding revenues versus expenses, they still have past issues to deal with. It was the lending binge of former years that put banks it the positions they are in now. Lenders were giving loans away to almost anyone who asked, not checking on repayment, applicant’s pasts or a home’s value-to-loan ratio. Unwise lending was rampant and is a huge contributor to the recession the economy is now experiencing.

So with banking lenders narrowing their list of qualified borrowers, it’s the cash advance lenders who are benefiting. They can still extend money because of the structure of the loan and even large financial institutions cannot replicate the model. Banks are hoping that the bailout, coupled with the interest rate charged to customers, will give them a complete turnaround and allow them to start fresh. The problem however remains that “as money comes in one door, it’s flowing out another as the slump in business activity and rise in unemployment pushes more borrowers into default,” according to business analysts.

According to the Treasury Department, of the largest U.S. banks, nine reported increases in revenue in the past year, while twelve reported declines. It’s also still not completely evident how many banks will end up with revenues once the real estate and consumer loan totals are factored into the equation. It’s still too soon to claim the banking industry is back on the rise based on the past 12-month history of performance.

Foreclosures still up

Many banks stopped foreclosure proceedings because they wanted to see what the bailout would do and how the government’s help would factor into the market. Now that banks have begun once again sifting through questionable loan customers, profits could start decreasing again. It’s hard to estimate how many more defaulted home loans are coming.

How Americans will cope

With the full foreclosure market still playing into the economy, lenders are still being cautious about underwriting. Many Americans will be sending their application for money to a cash advance lender, rather than a banking institution. They are much more likely to be able to extend funds and help taxpayers help themselves.