Cash Advance Loans – A Technological Solution
Is there Actually a Better Solution to Cash Advance Loans?
With the Consumer Financial Protection Bureau, or CFPB, making changes to the short-term loan industry, this new option may be the only way for cash-strapped people to get the funds that they need. Because of the newness of the service, people have yet to decide what to call it. Some are referring to it as the new cash advance while others call it instant pay.
Regardless of its name, a customer who seeks out the service for emergency expenses will receive money immediately by drawing on a future paycheck. With this service, those who need cash receive it based on what they’ve already earned instead of waiting for their employer to pay them according to the company’s pay schedule. Some instant cash companies are teaming up with businesses to provide the service as a worker’s benefit while other cash providers offer the service to anyone.
A Way to Avoid Expensive Payday Loans?
Those who operate instant cash programs say that the funding option is a way for people to gain access to cash fast without incurring the fees that come with expensive payday loans and auto title loans. Cheatsheet reports that people who take out a two-week payday loan are likely to pay $15 for every $100 that they borrow, which is an annual percentage rate of 400 percent. When people access their paychecks early, they can avoid paying interest. Also, the service usually comes with a limit on the amount of cash that can be withdrawn. This keeps them from becoming mired in debt.
Who Turns to Payday Loan Lenders for Help?
Payday loan lenders began popping up at a time when the country’s income divide was starting to grow. This has been a common theme throughout the country’s history. For instance, during the early 20th century, business was booming for loan sharks.
Payday lenders currently provide loans to more than 19 million American households, which is almost one in six. According to the Pew Charitable Trusts, the average payday loan borrower is a Caucasian woman who is between the ages of 25 and 44. If the CFPB winds up shutting the industry down, the new advance service could take the place of traditional payday loans.
With the CFPB involved, the stakes are high for payday loan lenders as well as for those who borrow funds from them. While it seems that the financial industry would offer a more affordable way for less creditworthy borrowers to acquire funds, those who have poor credit struggle to find cash when money-based emergencies arise.
Solving a Cash Problem with Technology
Since most employers pay their workers every two weeks, the money that people make hovers just out of reach while bills and daily expenses accumulate. Instant pay providers point out that with their service, people are not borrowing funds from a lender. Instead, they’re gaining access to the money that they’ve earned more quickly, which makes the instant cash service a technology solution.
Of course, the best way for people to deal with unexpected expenses is for them to build up a financial cushion. Most financial professionals advise people to keep an emergency fund of at least $1,000 in savings, but an ideal amount is two or three months of living expenses.
Failing to Address the Underlying Causes of Money Problems
While instant pay services help people when they are in the occasional financial jam, this kind of aid doesn’t speak to the principal causes of most people’s money-related stress. In many cases, people suffer from financial issues due to poor money management skills and wages that are excessively low. The real answer to stopping workers from living paycheck-to-paycheck is for people to manage their spending while building their human capital since this helps them earn more. To learn more about the new cash advance service, visit the PersonalMoneyStore.com.