Don’t Let Advance Cash Loans Wreck Your Finances
When financial emergencies strike, don’t let advance cash loans wreck your finances. If you turn to cash loan direct lenders, you could become trapped in a cycle of debt, putting your financial future at risk. Instead, take steps to protect yourself.
Advance Cash Loans Can Wreck Your Finances
As long as advance cash loans are paid in full and on time, you should be able to hang on to your financial well-being. Borrowers run into trouble when they don’t pay their loan by the due date. If this happens to you, then advance cash loan lenders are usually quite accommodating. They’ll let you roll an old loan over into a new one.
When you roll a loan over, you’ll end up with more fees and a later payoff date, prolonging the loan. While the fees for a cash loan seem low, they are high when you calculate the annual percentage rate, or APR, that you’re being charged.
Let’s Take a Look at the APR Details
The United States Federal Trade Commission, or FTC, published an example of the APR that you’ll pay for a cash loan. According to the agency, if you borrow $100 for two weeks and pay the lender a $15 fee, then you’ll pay an APR of 391 percent.
Every time you roll the loan over into a new lending agreement, you’ll pay a higher rate. Research shows that even though advance cash loans are meant to be short-term lending products, on average, most people who borrow them end up in debt for more than six months.
How Can You Avoid Advance Cash Loans When You Need Money Fast?
The best way to avoid advance cash loans is to establish a savings fund, but today, doing so isn’t easy. If you need money fast, alternatives to cash loans exist. One Main Financial reports that the best alternatives to cash advance loans include attempting to arrange a payment plan with your current creditors, taking out a personal loan or withdrawing cash from a credit card.
The Benefits of Arranging a Payment Plan
If you’ve suddenly found yourself in a cash shortage and are facing late payments with your current creditors, contact them to see if they’ll agree to a payment arrangement. They may allow you to pay a small portion now and the rest later. Often, they’ll agree to new terms without dinging your credit history.
Lenders will do this because it’s better for them to collect what you owe from you instead of going through a third-party collector. Once an account reaches a third-party collector, the lender will only receive a small percentage of the amount that they lent to you.
Taking Out a Personal Loan Has Its Advantages
If you belong to a financial institution like a bank or a credit union, then you may be eligible for a personal loan. This type of borrowing option is typically a short-term loan, one that features lower rates than what you would pay to a cash loan lender.
Withdrawing Cash from a Credit Card May Be the Best Option
Withdrawing cash from a credit card is a fast and convenient option. Interest rates for credit card cash advances are generally higher than they are for other types of loans, but the APR is still usually lower than it is for cash loans.
Apply for a Payday Loan Alternative
The National Credit Union Administration, or NCUA, now permits federal credit unions to offer their members small-dollar loans. In the industry, these loans are referred to as payday alternative loans or PALs.
The Ins and Outs of a PAL
To be eligible for a PAL, you must have been a member of an NCUA financial institution for at least one month. This type of loan is available in amounts that are between $200 and $1,000. In addition, the loan terms for a PAL range from one month to six months.
If a credit union agrees to lend you money under a PAL, then it can only charge you a fee to recoup the processing costs. This fee cannot be more than $20. You will not be able to roll a PAL over into a new loan.
Some credit unions provide financial counseling advice free to their members. If you are having trouble managing your budget, consider taking yours up on it if it does. This will help you keep your future finances intact.
Tips for Creating a Budget that Works for You
When it comes to creating a budget, it’s important to be realistic. So, be sure to include your daily, monthly and yearly expenses. Also, eliminate any purchases that are unnecessary. Keep in mind that small, seemingly trivial, expenses add up. For instance, if you purchase your lunch out or get a fancy coffee several times a week, then these costs could be what’s pushing you over your budget.
While keeping your expenses down, work to build your savings. Small deposits help. But, establishing a set savings plan will put you on the path to success. Once you have money in a savings account, you can avoid taking out a loan for an emergency.
Take Steps to Protect Your Financial Future
Advance cash loans are known for wrecking the finances of those who borrow them. Don’t let this happen to you. If this kind of loan is your only option, then use caution if you decide to take one out.
When you borrow money through a short-term lender, be sure to repay the loan by the due date. Avoid rolling a cash loan over into a new one, and take steps to build up a savings account for future financial emergencies. To learn more about advance cash loans, visit the Personal Money Store.