Basic Things You Must Know About Payday Loan Or Cash Advance

Payday Loans

Basic Things You Must Know About Payday Loan Or Cash Advance

When you are hit with a financial emergency of temporary nature and you are short of cash, you look for payday loan or cash advance for an immediate solution. But, it is very important for you to understand that both these financing tools do not always mean the same. Following is a brief rundown on not only how you can differentiate between the two but also on the pros and cons of both the options under different circumstances.

Borrowing From Payday Lenders

The most common method that people think of is to borrow a quick loan from a payday loan lender. The good thing about this option is that it can bring you instant money through a very simple process. The biggest drawbacks include the extremely high cost with lots of hidden charges. Even a $200 of loan borrowed for a short period of three weeks only can require you to pay back over $500 from your next salary. So, do not just look at the attractive features that these loans claim to offer, but you must also look at the downside of it.

Borrowing From Check Cashing Agencies

Borrowing a cash advance from a check cashing agency is another common option, but it is often equally expensive. In this method, you have to give a postdated check to a check cashing agency and they give you certain amount of cash in return. For example, if you need $200 of loan for three weeks, they may ask you to give a postdated check (dated to your next pay day when you get your salary credited into your bank account) of over $500 that includes the amount of interest plus [processing fees and other charges. Their interest rates may amount to $70 per $100 of loan issued for 14 days. So, a $200 of loan will cost you $210 in terms of interest only for three weeks. Additional charges may amount to $30 per $100 issued for 14 days. So, a $200 of loan will cost you $90 extra. So, the total cost amounts to $300, which means a total repayment amount of $500.

As you can see, whether you borrow a payday loan or a cash advance, both can turn out to be excessively expensive for you. If your monthly income is already a low amount of money which is not sufficient enough to even make your ends meet, the high cots of $300 for a small loan of $200 is obviously something that you can never afford. So, you must make your decision wisely in this regard. There is no sense in borrowing such a high cost loan that you cannot afford to repay in time because non-repayment will push you into a deeper debt problem.