How to Use Cash Loans Wisely – Ensuring that Your ROI Surpasses the Loan’s Interest Rate
Cash advance loans are convenient. However, make sure that you’re using them wisely in ways that will benefit you. Before taking one out, ensure that your return on investment, or ROI, surpasses the interest rate and fees that you’ll incur.
In the United States, there are more than 10,000 emergency cash lenders with new ones arriving on the scene all the time. According to an article posted on FinancialWeb, emergency cash can be advantageous. For instance, you will likely be able to secure a loan without undergoing a credit check. In addition, cash loans do not generally require collateral, and you can get one quickly. In fact, the application process typically takes just 15 to 20 minutes while lenders are able to transfer the funds into your checking account directly.
What You Can Expect to Pay for Cash
The Federal Trade Commission confirms that the lenders of cash loans must abide by the Truth in Lending Act, which requires all lenders to disclose the true cost of a loan. Be sure to scrutinize this information to ensure that your ROI will exceed the interest charged by a cash lender before taking out a loan.
The amount that you’ll end up paying to borrow cash will vary by company, but according to one lender’s chart, if you take out a $400 cash advance loan for two weeks, you’ll pay a fee of $100. While this seems affordable, the annual percentage rate, or APR, for this loan is 661 percent. If you’re unable to repay the funds in two weeks and wind up extending it, the company will charge you late fees.
You may have the option of repaying it through a payment plan. This will give you more time to pay it back, but added fees also come with this option. For instance, you can make a $99 payment for seven months and pay around $6.50 for interest as well as a $384 fee, which results in an APR of 477 percent.
Wise Uses for Cash Loans
From saving your credit history to decreasing your financial stress, there are many wise uses for cash loans. A ding against your credit can have lasting consequences. For instance, when a late payment is reported against you, it can stay on your credit history for seven years. This could cost you in the form of higher interest rates on future loans, which is likely to total more than the interest rates charged by cash loan lenders.
Emergencies are other sensible uses for cash advance loans. This may include covering a medical expense, a utility bill or the cost of a car repair. You may even need emergency cash to get to a family member or friend who is sick.
The late payment charges for mortgages can be around $80, so in some cases, it’s less expensive to borrow cash from a lender than it is to incur a late fee.
Things to Consider Before Taking Out a Cash Loan
Keep in mind that there may be better ways to handle a financial shortage than to take out a cash loan. Use this type of loan to cover urgent but small cash problems that must be dealt with directly. Just because a cash loan lender is willing to lend you money, it doesn’t mean that you should borrow it. Practical Money Skills advises borrowers to assess their regular expenses before taking on additional debt to make sure that they can afford to repay the loan. Also, consider how much cash you prefer to have on hand to feel financially stable.
Use Cash Loans to Your Advantage
When it comes to cash loans, it’s important to use them wisely by making sure that the ROI will exceed the interest. However, this can mean something different to everyone. For instance, to you, avoiding the emotional stress of creditors calling you may be worth the added interest charges of a cash loan while someone else may need their ROI to exceed the amount of interest accrued literally. To read more about cash loans and the best ways to use them, visit the Personal Money Store.