Understanding Consumer Advance Loans

Understanding Consumer Advance Loans

A consumer Advance loan is a type of loan offered on short period for emergency reasons. This loan has a very less cash limit ranging from $100 to $1000. It is not meant for payment of heavy debt or other purposes which require heavy cash. It is also known as fast cash loan. A consumer Advance loan is an easy and immediate way of getting a short term loan. In a Consumer Advance loan, the lender gives loan on the basis of the employment record. The loan given is of a small amount. The borrower has to repay the amount by the next pay date. That means the amount has to be paid by the next date the borrower gets money from his income source. It is essential for the borrower to have a regular source of income like a job or business. The institution lending money checks of these criteria. There may be other requirements which may differ from one lender to another. The lender may perform background checks before finalizing the loan. There is also a provision for extending the time limit. There may be additional fees for this provision. The interest rate on the money given can vary from country to country.

There are different set of rules regarding Cash Advance loan in every country. The borrower writes a post dated check to the lender. This is not the repayment method but an alternate option, in case the borrower does not return the money. On the specified date, the borrower returns the amount to the lender. Only if the borrower is unable to return the money, the lender redeems the check. Payday loans are popular in many countries and used by people all over the world for emergency reasons. Some Australian states like Queensland have imposed 48% -APR (Annual Percentage Rate). IN UK payday loans are on the rise in total lending amount reaching 1.2 billion pounds. In the USA, payday lending is illegal in 17 states and legal in 37. In Canada, payday loans are governed by state provinces. It is essential to monitor the organization offering payday lending in order to ensure smooth transaction and fare treatment.

Cash Advance loans have also faced some criticism in recent years. Prominent criticism faced is that this loan type drains money from low income communities. Since cash advance loans have higher interest rate than other loan types, cash advance loans drain assets of people with low income. It gets more difficult to repay loan in short notice. Prolonging loan payment causes an increase in the amount to return. This puts the lender in a difficult position. There have been instances of the lender being at a loss because the borrower could not repay the loan. This loan type has a default rate of 6%. Payday loans, like any loan type, must be taken only after consideration. One must understand all the details carefully. One must consider the risks involved and ability to repay the loan must be taken into account. People offering such loans must perform a background check in order to avoid losses due to inability to repay the amount.

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