With the growing bad credit situation individuals particularly of the middle classes are finding their lives difficult to run on a day to day basis. Cash advances or paydays loans enable individual to receive ready cash in order to meet their expenses. This has tremendously improved the credit situation of individual who are not able to borrow any money. With the ready availability of cash individuals are now able to take loans are improve their credit situations.
Payday Loan
The Payday Loan or Cash advances are short terms loans that are needed to cover the immediate expenses of individual till the next pay that the individual is to receive. This loan is only for a short duration of time lasting for approximately 2 weeks. The loan amount that an individual can take is around $100 to $1000. Just like any other loan, cash advances are also charged with an interest amount that may vary from 390 percent to 900 percent annually. The conceptualization of the cash Advances are similar to the credit card system as cash is available against a prearranged credit line.
Cash advance regularities
In October 2006 the United States Congress passed a bill that would regulate the financial transactions made through the cash advance. This measure was primarily seen to effect only state financial regulation in particularly the lending to military personnel was to be set at 36% of APR. Military personnel’s were particularly cited in regulating cash advances as the Defense Department was concerned about the growing financial convenience that they were able to find for themselves. This added to the overall income of the military personnel’s and moreover hindered the overall financial feasibility of the personnel’s as they might not be able to pay the cash on time. Further this would affect the deployment of troops.
Benefits of Cash Advances
Cash advances don’t after all point to a pessimistic picture about financial transactions, experts encourage these loan types as these are the only options available to consumer who have bad credit. In order to sort out these bad credit consumers need to compensate for their immediate expenses as they are unable to get a bank loan, low interest benefits and credit card alternatives. The most pressing advantage of cash advances is that one gets ready cash when one has applied for this loan system. It is almost as if individuals are getting their regular income from a paid salary. This is certainly beneficial with people at the lower range of income. However critics warn about the fact that individuals can get caught up in a debt trap as the loan amounts that cash advances procure are very small. Therefore in terms of financial management individuals may not be able to monitor the cash amount that has been borrowed.
Industry assessment of cash Advances
What factors does the credit system count?
At the macro level cash advances have enabled the loan industry to grow at a faster rate. With transaction of money on a smaller scale and for a short period of time Cash advances have proven to be a regular source of income for individuals.
Therefore, cash advances have proven to be a viable alternative for individuals who are either unemployed or from the lower middle class, a new opportunity to improve their financial standings and hopefully gain credit trust of other financial institutions.
