Cash Advance Loans

Cash advance loans can be used for almost any financial need imaginable. Because of their growing popularity they have naturally attracted opposition, such as claims that put cash advance products in a bad light. Are cash advances really all that bad? What's the smartest way to use them? This article will give you a brief history of the bad press that cash advances have received as well as some useful tips on how to avoid the common pitfalls associated with cash advance products.

There is such a thing as bad press

As smaller loans became more popular in the early 1990's, private firms and banks began to open up stores that offered cash advance loans to consumers at rates that were incredibly high as compared to those associated with typical mortgage loans and other like products. These loans had annual percentage rates (APR) upwards of 350% as compared to the nominal 7% or so, depending of course on the debtor's credit rating. Lenders were allowed to do this amidst a growing trend nationally that called fore the deregulation of many businesses - including banking. With the control of the government reduced and the need for short-term loans present, the stage was set for cash advances to make their first foray into the marketplace.

As with any new product, cash advances received mixed reviews from the media and their initial customers. With time stories began to surface about parents, adults, and even teenagers taking advantage of a cash advance and then not paying it off due to the high amount of interest earned on the loan. These stories were wildly popular with the new stations as they grasped for anything that could potentially keep a consumer glued to the TV. Everyone has had problems with paying bills before, so stories within this line were considered very exciting. The end result was cash advances receiving the stigma of practicing predatory lending - a stigma that still plagues the cash advance industry to this day.

Good lenders, bad lenders, and everything in between

Every industry has its bad apples, though some have more than their fair share. Many companies that offer cash advance products are there to provide a legitimate service for people with immediate financial need, while others prey on a consumer's dire need in an effort to charge outrageous interest rates. At first it was difficult to tell the difference between a good lender and a bad lender, but eventually the industry found a sound economic balance in terms of a standard fee per hundred dollars borrowed; this figure settled at about $20 - $30, depending on current market rates, demand, and so on.

Shopping around for the best deal is always a good idea, and doing so for cash advance loans is the best way to ensure that you're getting the best rate available. Because rates are always fluctuating and the number of active lenders can change at a moment's notice, no site exists that can effectively monitor current companies and their rates - so it's up to you to decide what's best for you. As long as the fee per hundred stays within the $20 to $30 mark you'll be fine, though you should be suspicious of any company that offers your a higher (or even a lower) dollar amount.

Is that rate a little high?

Though $20 or even $30 per hundred borrowed can seem a little high, you should remember that higher prices are often put on items that are considered to be a convenience as well as those that are lent to individuals that have limited credit capability. Since most customers use cash advances to pay bills or cover emergency expenses, it's reasonable to assume that the customer may not be able to pay back the loan by the date on which it is due. This is a risky investment for the company issuing the loan, so the interest rates (or in this case fee per hundred borrowed) is high in order to off the valuable service without the company going bankrupt.