In the earlier days when debt was still new and banks were the safe option while individual lenders were the other option that were mostly unregulated, borrowing was quite a risk. It wasn’t a risk just for the borrower, but also for the lender. Fast forward to today’s time, and a lot of regulations and close oversight have made lending much safer and hence something that a large number of people in the US depend upon. Here, we take a look at cash advances – the short term loan products offered by direct lenders (non-bank). More specifically, we shall be discussing how one could take advantage of the online cash advance loans – those that such lenders offer through a completely online process, which is aimed at convenience, quickness and much lesser filtration, which leads to a relatively expensive deal for a borrower. But here’s the catch – the terms are so short that the final absolute amount of money that one pays, may not be too much.
How to Keep Costs Low?
Let’s start with the basics – cost. This is what makes a loan less attractive versus spending savings and this is also what mostly makes one of two similar loans more attractive than the other. There are two ways to look at a loan’s cost – one is to understand what percentage of interest you would be charged and the other is to understand how much you will pay back over time, for the amount that you borrow. The former is what is indicated best by APR and the latter is the absolute cost of the loan.
Increasingly being touted as the right way of measuring a loan’s expense, APR is how much simple interest you pay on the loan amount per year. While this is a valid way to compare loans of similar tenure and similar processes, it is important to understand that loans with significantly shorter terms would tend to have exponentially high APRs, which however might not cost the borrower much in totality. For example, if a loan is being taken at 10% APR for 100 days, it would cost the same as one at 100% APR for 10 days. Also, a loan being taken at 20% APR for 100 days, would cost twice as much as one taken at 100% APR for 10 days.
The trend for the debt market is simple. Where there is higher risk, the loan lender shall expect higher returns. APRs of cash advances that are available easily to almost everyone (since the credit check is mostly not mandatory) with no complex paperwork or collateral, are high for this primary reason – the lender is taking a bigger risk while choosing to make the decision to lend accommodating these terms.
When taking a cash advance loan, it is very essential to understand the absolute cost of your loan. Fair and trustworthy loan lenders will disclose this clearly on websites in appropriate sections and also understanding one’s contract would help understand this too. It is simply the amount that a borrower pays in excess while paying back the loan, over the amount that they borrow.
At a much higher APR, the absolute cost of a very short term loan can still be lower than a low APR loan with a long term. So essentially, it comes down to the borrower’s needs, situation and financial health, to decide when a cash advance is right.
To keep costs low while taking a cash advance, it is essential to choose the best deal and then stick to the payback schedule as very short term loans given by lenders at high risk are bound to be quite expensive in case of delays in payback.
Why Choose Online?
When a non-bank direct lender loan is what you need, you shall be looking for other lending entities. Lenders that deal with higher risk loans are limited in number and it would be harder to find the right, reliable solution. Thanks to the internet, there are bloggers, reviewers, and a ton of other references available to find out about and estimate the performance and reliability lenders who deal online. This is not the case with lenders who operate from pawn shops whose services are less exposed and reviewed. While this makes the online direct lenders the right choice, it is not the only benefit you get when dealing with online lenders.
Other distinct advantages include:
- Helpful in emergencies: rather than running around looking for loans, the person in need can apply for money online and focus on addressing the actual emergency better.
- More competition: always leads to better deals for customers over time.
- No paperwork: most such loans would require no paperwork – everything is done through scanned documents and e-signatures.
- Accessible wherever the internet is: An internet connection on your smartphone, laptop or desktop is all you need.