What You Should Know About Cash Advance Loans: An interview with financial expert Ann Logue
Ann, what’s the difference between a cash advance loan and a credit card cash advance?
Cash advance is a catch-all term for many different kinds of loans. Essentially, the lender gives you cash in advance of your paying it off.
In recent years, the payday loan industry has been rebranding payday loans as cash advance loans. They are doing this to get around the bad publicity about payday loan abuses. These loans are structured the same way, though. The lender gives you a small loan that’s due in a few weeks and charges you a fee for that. If you can’t pay off the loan and the fees in full, it rolls over for a few more weeks. The fees compound and pretty soon you have a real problem. Many cash advance borrowers end up in worse shape after taking out the loan than they were to begin with.
A credit card cash advance is a cash loan taken against your credit card. The amount you can borrow is usually less than the total credit limit. The usual way to take out a credit card cash advance is to use an ATM. Some lending companies will let you get the full amount of your cash advance limit by visiting their offices. Of course, they charge a fee for that.
A credit card cash advance is safe, right? I mean it’s my credit limit that I’m borrowing against, right?
It’s as safe as any other use of a credit card. You have to make the payments. Keep in mind that there may be a higher minimum payment, a higher interest rate, and additional fees on a credit card cash advance. Repayment might not work the way it does with other charges.
What if I’m borrowing money online and my lender doesn’t say “Payday Loan” anywhere on their website? How can I tell if they’re safe or not?
The name is less important than how the loan operates. Yes, it’s important to get the money you need to solve a problem. It’s also important to be able to pay off the loan. Very few people are able to meet the payment schedule on a payday loan. Payday-type loans have one repayment date and require payment in full. Other types of loans have a series of payments stretched out over a longer period of time, which many borrowers find easier to handle.
I’ve got bad credit and a bank won’t finance me, where can I go that’s still safe and reputable?
You want to make sure the lender is licensed in the state where you live. That’s a first key step. Second, check online reviews — that could give you a good sense of what types of experience other people have had. Check the second or third pages of the search results, too — that’s where the fun stuff starts to show up.
If I find myself trapped with a payday or cash advance lender, what should I do?
Taking out a new loan with a lender that offers installment payments is a better way for many people. They use the cash from that loan to pay off the payday loan. They have to pay off the new loan, of course, but they can do that with several smaller payments instead of one large one. It’s a more responsible, safer way to manage your loans.
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