Cash Advance Loans

Written by Jeremy Horelick
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In looking at cash advance loans head to head against other forms of credit, it's clear that they have credit cards beat in terms of value. But what is the cost of using payday loans in terms of other regularly incurred expenses such as late rent? Again, a specific example can be highly useful in understanding the attraction of short-term cash loans.

Most landlords charge one-time fees of 30, 40, 50, or 60 dollars for late rent payments. Typically, tenants have a standard five-day grace period in which to make their payments, but after that they may incur progressively higher penalties. This is because most landlords are themselves borrowers and need to repay their loan through a monthly mortgage. If they fail to do so, they incur penalties of their own from their lenders. Hence, the need for safeguards against tenant delinquency.

Cash Advance Loans vs. Late Rent Charges

To make the comparison a fair one, it's easiest to think about cash advance loans vis-a-vis the delayed rent payment, for that is the alternative to borrowing money. But this alternative comes at a cost, just as borrowing 200 dollars comes at a cost (for our purposes, it's one of 30 dollars). If one were to calculate the APR on an average late fee, one would come up with 520, well over 100 points higher than the annualized APR of cash advance loans, which we've already shown to be a poor methodology to begin with.

So, it turns out, fast payday loans easily justify avoiding their consequences (credit card penalties and rent fees). As it turns out, cash advance loans are also preferable to bounced check charges, which are imposed by both your bank and, often, the party to whom you've written the check, since they must then pay money to their bank. Additionally, they must suffer the inconvenience of not having your funds available when writing checks of their own, which can set off a nasty chain of consequences.


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