Cash Advance Loans
A cash advance or payday loan is basically a short-term personal loan
provided by an institution to an individual, with the
stipulation that the individual pay back the loan or the
interest within a specified period of time. A cash
advance loan is generally for a small amount ($100 – $500) and
is normally paid back within a few days or weeks. While
most payday loan companies have physical locations where
customers can apply in person, many offer online
services, including depositing loan money directly into
an individual’s checking account. Most companies require
that information such as checking accounts, employment
verification, and proof of citizenship and age be faxed
to them to expedite loans, as well as to avoid losing
money to people who would attempt to falsify information
with the intent of not paying back their loan. Cash
advance loan fees generally run from 5%-25% interest on the
amount borrowed, but are normally less expensive then
writing a hot check or paying late fees for your rent,
and certainly more convenient than having your utilities
cut off.
Minimum Requirements
Cash advance loan companies require that their customers
meet or exceed certain conditions in order to be
pre-approved for a loan. A pre-approval is a set of
minimum requirements whereby a lender deems the
individual applying for the loan to be a
“safe” or “secure” customer —
someone who is very likely to pay back their loan.
Because most payday loan companies provide hundreds and
thousands of loans each day, they are usually unable to
look at the loan needs of their potential customers on
an individual, case-by-case basis, at least not until
they have paid back their initial loan. Thus, cash
advance loan lenders require a limited number of minimum
requirements to ensure that they can continue business
operations. Almost all cash advance loan companies
require one
or more of the following stipulations. The individual
applying for the loan must:
-
Be currently employed,
or be receiving a recurring income of some sort.
-
Have been employed at
their current job for at least 3 months (many
companies only require that you be employed).
-
Be making between
$800-$1200 a month at their place of employment, or
from recurring income.
-
Be living at the same
address for at least 3 months (once again, many
companies waive this requirement).
-
Have an active
checking account, including personalized checks, as
well as direct deposit activity or capability.
-
Have had their
checking account for at least 3 months (many
companies do not require a set period of time).
-
Access to a fax
machine (although some companies now accept
applications completely online).
-
Be a citizen of the
United States, or a legal resident of the U. S.
- At least 18 years of
age.
Pre-Approvals
Once an individual has been pre-approved for a cash
advance loan, many companies require that additional
information be faxed to them. Many, but not all,
require some or all of the following in order to
complete the loan process:
-
A complete bank
statement.
-
A recent employment
pay stub.
-
A copy of state-issued
legal identification (usually requiring a picture).
-
A voided personal
check.
-
A recent utility bill
(usually a telephone or cable bill).
- A signed copy of the
loan agreement (if the application was filled online).
Membership Has It’s
Privileges
Although the first time an individual applies for a
cash advance loan it might seem a little more complicated than
they had expected, once the initial loan is paid (or at
least the recurring interest), the company providing the
loan usually considers the individual someone who can be
trusted, and any loan thereafter is almost always
pre-approved as well as processed rapidly, and without
the need for faxes and forms. Also, some cash advance loan
companies offer their trusted customers better interest
and/or grace periods on their subsequent loans.
Individuals who apply for and who promptly pay back
their payday loans can also use this information to help
them when they later apply for credit cards, auto loans,
or home loans, with good effect. In fact, many
individuals with bad credit ratings have been able, as a
first step, to re-establish their credit to a certain
extent just by applying for and paying off a number of
payday loans. Because a cash advance loan is not unlike a
credit card, where one borrows money to buy things, but
needs to pay part of the principal or the interest at a
later date, many institutions are liable to take a
positive view of an individual who promptly pays their
loans.
Credit Checks
Contrary to popular opinion, most cash advance loan
companies do not perform credit checks of their
potential customers. Since they largely serve those with
little credit, no credit, or bad credit, companies know
that credit checks would be a horrible waste of time and
money, as well as being a bar to serving their business
needs. Most payday loan companies do, however, perform a
check to see if an individual has any outstanding cash
advance loans. This is called TeleCheck, a database of
consumer’s check writing history. An unpaid outstanding
cash advance loan will more than likely disqualify someone looking to
apply for another loan.
Paying Back Your Loan
Most cash advance loan companies require that their customers
pay back their first loan completely in the allotted
time, although some require just a minimum payment per
time period, like a credit card. With subsequent loans,
lenders become more lenient to the individual customer.
Many cash advance loan companies require that you pay back
your initial loan on your next payday (usually within
2-4 weeks), plus an interest charge of anywhere from
$5-$25 per $100 loaned (ie. $25-$100 per $500 loan).
Obviously, those who have already paid in full their
initial loan will be deemed trustworthy enough to
qualify for minimal interest and longer time periods in
which to pay back their subsequent loans. Cash advance loan
companies usually withdraw any loan principal plus
interest directly from an individual’s checking account,
but usually give their customers a chance to make sure
they have enough money in their account before
attempting to extract money which is not available, and
thereby incurring an NSF charge to their clients. If you
are not sure you will have enough money to cover the
loan on the allotted date of withdrawal, make sure to
contact the loan company, either by phone, email, or in
person, so that you don’t lose more money on a bank
charge, as well as incur a blight to you lending
history.
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