Lots of people know already why they need a cash advance loan when they apply. It could be an unexpected bill for a visit to the emergency room or an auto repair that can cause a financial crises one is not easily prepared for.
It is common conception that one would think that mainly lower income families get into those kinds of situations, but even before this recession started many middle class families discovered the convenience of using a quick cash advance loan when actual cash is tight. It is very easy to charge some expenses to a credit card or charge card where they then “disappear” within the overall balance and sure enough you would have to pay recurring interest for these expenses – adding to the overall cost of the purchase or expense. And as we all know – credit card interest is not as cheap as the card issuing companies try to make us believe. The average card balance is carried for more than 22 months before eventually (if at all) being paid off. Consumers are lead into misbelieve that the minimum payment actually reduces the card balance.
Now you can do the math between a real short term loan with higher interest that is paid off after 3 months and a credit card balance that is carried along for over 20 months with almost the same interest rate. You easily discover that it is indeed cheaper to apply for a fast cash loan with its higher upfront fees than to charge the expense to your credit card. Another benefit is that a cash advance does not affect your credit score while a higher credit card balance will negatively affect your credit score. In addition you will pay interest on the interest you accumulate on your credit card account. Many credit companies charge between 18% and 23% interest if the balance is not paid off.
Conclusion: As strange as it seems, but a small cash advance loan can be the cheaper alternative when it comes to the need of getting some quick cash. Also, please keep in mind that these short-term loans are usually to be paid back within 20-40 days at most (some lenders allow loan extensions up to 90 days), while a credit card balance is carried for 22 months or more including accumulated interest on top of it. Consumer advocates always blame the Payday Loan industry for the financial problems of consumers, while it is really necessary to take a closer look and compare the different situations. Sometimes it makes sense to pay via credit card and charge an expense to the account, but sometimes it can be cheaper to get a fast cash advance payday loan instead.
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