By: Stephanie Hodge Breur
Over the past few years, consumers have seen an explosion in the number of payday cash advance loan companies they can turn to for assistance in times of need. These loan companies have been established in many states throughout the US and are quickly growing in popularity. There are a variety of reasons why these companies seem to be turning up on every street corner in America.
The cash advance payday loan business model is very popular these days due to simple mathematics. Payday cash loan lenders are willingly offering quick payday loans that other traditional lenders are completely unwilling to provide. This has enabled payday cash advance loan companies to tap into a huge market of consumers who have been ignored by traditional lenders for decades.
One reason for this is that traditional banks generally have a minimum amount that they are willing to lend to customers. This amount varies from payday lender to lender, but generally no traditional lender is willing to offer a $300-$500 loan. So if you are a consumer that needs a small short-term loan, a bank is not the place to go for help. Banks do not do small loans like this because they simply do not make enough profit from lending small amounts of money. If banks provided such small loans on a large scale they would begin to lose money hand-over-fist. Imagine if a bank gives a $500 loan and charges 5% interest. The bank would only make $25 from this transaction. Alternatively, if a bank provides a $5,000 loan with a 5% interest rate, they would make $250 on the loan.
Banks are in the business of making money and are accustomed to crunching the numbers in order to make sure they make a profit. In the end, it comes down to a simple matter of return on investment (ROI) and most banks feel that there is simply not enough money to be made from small loans. Banks have a number of highly skilled, and highly paid, employees to pay for. If a single employee were to spend hours issuing a small loan and tracking down those who do not repay the loan, the bank would not be making enough money to justify paying for that employee.
Another reason why payday cash advance loan companies are growing in numbers is because many people with good credit have alternatives for small, short-term loans. Some of the alternatives include checking account overdraft loans from traditional banks and available balances on credit cards. However, if a customer has bad credit or is unable to utilize checking account overdraft loans or credit card balances then their options become extremely limited.
Checking account overdraft loans are fine financial tools for consumers that are eligible for that option from their traditional bank. The problem is that not all banks offer these checking account overdraft loans to their customers, and even if it is offered by the bank, not all consumers have sufficient bank overdraft protection to take care of their small loan needs. Consumers that were unable to utilize the above mentioned methods for getting smaller loans were left to fall through the cracks until payday cash loan companies came into popularity. Cash advance payday loan companies now exist to help people who are in difficult financial situations similar to those described above get access to a quick payday loan.
A small, short-term loan is exactly what some people need to bail them out of a financial emergency. Cash advance payday loan companies are able to offer such small short-term loans because they rely on post-dated checks from the borrower. These post-dated checks work as a way to secure the loan for the lender and the check in hand guarantees that the lender has a solid chance of collecting their money. Another system used to secure quick payday loans by loan companies is called the faxless, no fax, or no faxing payday cash loan system. Online payday cash advance loan companies use electronic cash transfers to put the payday cash loan into the borrower’s checking account and uses electronic checks to collect the payday cash advance payoff.
Payday cash loan lenders do charge a fee, but many people agree that these fees are fairly reasonable considering that these companies can quickly rescue individuals experiencing financial emergencies. For example, a customer may be asked to pay a fee of $45-$50 on a $300 loan. When you compare this fee to fees associated with bounced checks, credit card interest rates and late fees, payday cash advance fees seem quite reasonable.
Generally, if a person tends to repay loans on time and in full, then a quick payday loan is a reasonable option to use. People can start to get in difficult situations with these loans if they do not repay them on time. If a customer defaults on a cash advance payday loan or opts for an extension, they will owe additional service fees. All lenders, payday cash advance companies, credit card companies, and traditional banks charge extra fees to borrowers who fail to pay their loan payment on time.
If you find yourself in an emergency situation where you need fast and immediate cash, you can turn to a payday cash advance lender to get a quick payday loan. If you are eligible to use credit cards or checking account overdraft loans for help, you should opt to take advantage of one of these alternatives. In the absence of both alternatives, a payday cash loan will be your next best bet to help you get fast cash to address your financial emergency.
