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Using Online Cash Advance Loans Responsibly December 8 2014 You may have noticed in your community the rise of cash advance loan businesses which have been one of the fastest growing industries in recent years. There are several reasons as to why this type of lending practice has risen so quickly in the past two to three decades which include looser regulations on the lending industry and a growing need for people to cover expenses with short term loans. With the rise of the internet there are now online loans that people all over the world can use to cover expenses that they cannot do for themselves. It is now possible to apply, be approved for a loan and have that money in your checking or savings account by the following day. For many, this type of loan system has become a necessary part of their lives. But what exactly is it, how does it work, what are the potential dangers and how can you be more responsible with handling this kind of loan? What are Cash Advance Loans? This is the type of loan that is made for the specific purpose of covering an unexpected expense that cannot wait until the next paycheck. This type of expense can be a number of things which range from a vehicular accident in which the car or truck needs to be repaired, a sudden medical expense or even a utility bill that was much higher than expected. While these are the typical reasons for online loans, there are many others. However, all of them have in common the fact that they are designed to cover expenses that must be taken care of before the next paycheck comes in. The loans are typically for relatively small amounts of money that range from $100 up to $1,500 although there are certain lenders that may offer more. These tend to be high interest loans designed to be paid back in a short period of time, generally from 30 to 60 days depending on the structure of the loan itself. Some lenders will allow the loan to be refinanced under certain conditions, but for the most part you will need to pay back the loan in a short amount of time. How It Works Online If you are in need of an emergency or cash advance loan, you can find one of many different companies on the internet designed to meet your needs. In most cases you will fill out a simple form that states how much you need, what is the purpose, your name and any pertinent information. That form is then sent to a lender or a lending network which will decide in a few minutes whether you are qualified to receive such a loan. For the most part, your credit score is not as important an issue has having a job that pays a consistent salary, a bank account number to receive the loan and a phone number where you can be reached. If you are approved, you will hear from the lender, who will take down all the information and set the conditions of the loan and then send you the money via direct deposit to your bank account. At this point, you can use the loan to cover the expense and then with your next paycheck pay back all or part of the loan that you took out. Depending on the length and size of the loan, it may take two, three or four paychecks to fully pay off. What are the Potential Dangers? Cash advance loans have become a necessity for many people because they live paycheck to paycheck and have no savings to speak of. This means that from a financial standpoint they are in a very vulnerable place and adding one more debt burden is something that is an added distraction even if the loan amount is relatively small. This is why there are dangers hidden in obtaining online loans that need to be fully addressed otherwise you may find yourself falling into the trap of having to borrow more money to pay off your loan. Borrowing Too Much Money: This is arguably the most common issue with those who find themselves in a spiral of having to borrow more money in order to pay off the loan. Basically, the expense was such that it required a loan which was larger than what could be quickly paid back. Refinancing: In paying back the loan, once a certain level of money is reached the loan can be refinanced which starts the process over again. While the recipient gets some of the cash back, it basically restarts the loan from scratch. Unexpected Expenses: For example, if you should need to have your vehicle repaired, you may find yourself spending more money getting to and from work or travelling which increases your normal expense amount and results in not having enough money to pay back the loan. Basically, anything that keeps you from repaying the loan on time will mean paying even more money in interests that will climb if you either do not make a payment, have to borrow money to repay the loan or refinance. This means that you will need to be careful when dealing with cash advance loans so that you don’t find yourself in worse trouble than you are in now. How to Use Online Loans Responsibly There are a number of ways that you can be more responsible when calculating whether to take one of these loans. This is especially important when you have other options available to pay the expense. What follows are just some of the ways you can be more responsible to ensure that you pay back the loan as soon as possible. Borrow the Minimum Possible: If the expense is $225, then only borrow that amount if at all possible. You may find that the lending company only works in increments of $50 or even $100. If so, then take the lowest amount and save the extra for your payment. Find other Ways to Raise Money: The beauty of cash advance loans is that they are very quick, but now you have bought yourself some time. While you are paying off the expense and waiting for your paycheck to arrive, find ways to raise the money needed to ensure that you pay off the loan. You can auction items off on eBay for example, do extra work or find something that will help bring in the cash so that you can pay off the loan. Find Another Lender: If it appears that you will have to borrow money in order to pay off the loan, try to find another lender with a lower interest rate. This may be a time to make a long-term loan if you were thinking of fixing up your home or something of that nature. Just be sure that the long-term, low interest loan is enough to pay off the higher interest advance loan that you took. Tips on Minimizing the Need for Loans Borrowing money to cover an unexpected expense is something that should only be done as a last resort. So, here are a few tips that will help you find other means of covering the unexpected without having to take out a loan. Save Your Change: Saving money can be difficult when you live from paycheck to paycheck. However, it is amazing just how easy it is to save up your pocket change. Use cash to pay for your daily items and put the change in a jar. In six months to a year, you will have a nice emergency fund saved up that will help cover that unexpected expense. Add another Income Stream: If you are living paycheck to paycheck, then you need to find another income stream to put money into your savings account. You might start a business on the web, do extra work for cash, and get more overtime at the place you work or even get a second job if necessary to pull yourself up and out of living from week to week. Cash advance or online loans are a necessity when there is nowhere else to turn. For most people, there are a minor annoyance that goes away once their next paycheck arrives which covers the loan. However, for some they do become a trap that becomes increasingly difficult to get out of because they underestimated the burden they created on their own financial situation. If you are living paycheck to paycheck with no savings put back, it would be very wise to start correcting that situation right now. By putting back a little bit of money each day, you can quickly build up the savings needed to pay any small, unexpected expense and not have to take out a cash advance loan. However, if you are finding yourself in a desperate situation where getting one of these online loans is your only choice then be fully aware of the potential pitfalls that awaits. The more favorable you can make the loan to fit your needs, the less likely you will fall into the cycle of borrowing money to pay off a loan. Click here to see previous blog entries
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