Paying the cash advance fees that many cash advance lenders charge can be very expensive. In fact, the interest rate that you pay on a cash advance is usually the highest interest rate that you will pay on anything. Many people are unfamiliar with how cash advances work and when they see how much they cost, it can be confusing. So why exactly do cash advance fees cost so much? Here are a few things to consider.
Emergency Situations Cash advance lenders make a habit of working with people in stressful situations. If you are considering taking out a cash advance, it is usually because of some sort of an emergency that could not be avoided. Your child might need to go to the doctor between pay days. A relative might have passed away suddenly and you need to fly out to their funeral. Regardless of the reason, you are usually very desperate for the money. Lenders know the urgency and need of stressful situations and charge a higher than normal interest rate for their services. Customers are in such a rough spot that they often do not have a choice. They will pay whatever the interest rate is, within reason, because they know that they need the money. Therefore, they can charge these high fees and will still have plenty of business. Short-Term Loans Since cash advance companies are dealing with distressed people, they count on people not analyzing everything as they go. The majority of cash advance loans are designed to be short-term. When you borrow money for only two weeks, the fees that they charge do not seem that much. You are dealing with smaller numbers over a shorter amortization period. Therefore, the $50 fee seems like a reasonable one for your cash advance. However, when you calculate that out over the course of an entire year, you are actually paying between 200 to 300 percent of interest. When you look at it at a glance over the short-term, it seems reasonable. However, when you look at it under a different light, it becomes much more expensive. Limited Options In most cases, when you need a cash advance, you do not have any other options to look at. Other businesses usually have a lot of competition that they have to deal with from other segments of the market. When you need money quickly, you often cannot afford to wait on the slow processes of a traditional loan. For example, if you got a home equity loan to get the money that you need, you could be waiting for weeks before you know if you are approved and must still wait for the money. By that time, the need for the money will have already come and gone. Cash advances are fast and when you need money quickly, you really do not have any other ways to get the money. They know that you need it fast and therefore can charge you accordingly.
via www.loan.com
