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Monthly Archives: January 2017

The Myth of Uncover Cash Advance Loan

High Rates And Fees?

Cash Advance Loans do carry high interest rates and fees. However, what they charge is actually a fair price for the service they offer. Since these loans do not require credit checks, the risk that the lender is taking by lending the money is incredibly higher than the risk of a lender that offers personal loans that require for approval tough credit and income verifications.

To put it plainly, what the lender is doing is jumping into a pool without knowing if it is filled with water or not. To compensate for these loses that he undoubtedly will have every 100 cash advance loans he needs to charge high amounts so as to make the business profitable. Otherwise, a lender would not last a day in the business.

Which Purpose Does It Serve?

As long as these loans are used for what they where meant for, there is no risk of getting caught into a debt vicious circle. And all the myth that surrounds cash advance loans falls down as lies always do, sooner or later. It is just like blaming a knife for a homicide; if a tool is misused, it is too easy to blame it on the tool. It is easy as well as unfair.

Thus, cash advance loans should only be used for emergency situations. If you have the time to resort to other source of finances, you should. Only if you need cash fast for coping with some unexpected expense and you do not have the time for a lender to run credit checks should you apply for a cash advance loan.

Once the loan is fully paid off, you should not make it a routine to resort to them whenever you need money. Whenever you can wait till payday, or get money through other means, you should not apply for a cash advance loan. You need to remember that they are meant only for emergencies and that their costs are high enough not to use them more than once or twice a year.

Debt accumulation is truly a serious problem, but blaming it on the financial market for offering cash advance loans is as erroneous as it is unintelligent. All debt problems should be blamed to a lack of proper financial behavior and eventually to unexpected events. Financial tools are there to be used with discretion, and misuses are only the consumers fault unless of course they are misinformed or deceived (there are legal tools for defending yourself from this too.)

 

Unsecured Loans

Unsecured loans have the fastest approval rate on the loan industry. There are even unsecured loans that can be approved within less than 24 Hs. Some loans require credit checks but others do not. And even those who do, are processed really fast as opposed to all the bureaucratic and time-consuming paperwork that is required for secured loans’ approval.

Credit Check And No Credit Check Unsecured Loans

There are both unsecured loans with credit verification and those that require no credit checks at all. The lack of collateral implies that the risk involved for the lender in the financial transaction is high and thus, a low credit score can be an obstacle for approval. That is the reason why credit verification are important on most unsecured loans. However, the process is very quick and simple which stands out against the verification process of secured loans that takes some time because the property’s documentation has to be checked also.

24 Hs. Loans are unsecured loans that require no credit check at all and are processed within a day. The only requirements for approval are proof of a steady job or other income and a bank account where the money is deposited after loan approval. However, these are short term loans that have to be repaid within a month or two at most.

Regular unsecured personal loans have also short approval processes. Though they are not as fast as 24 Hs. loans, they are still processed in just a couple of days so you will not need to wait as much as with secured loans. The longer approval process is due to the higher loan amounts that regular unsecured loans feature as opposed to 24 Hs. loans which only offer small loan amounts that never exceed the couple of thousands.

Requirements For Approval

Besides credit verification which may or may not be needed depending on the type of loan you apply to, there are also income requirements that you will need to meet. Basically, the lender will want to know that you can meet your obligations without having to make sacrifices in order to do so. As unexpected expenses always take place, the loan’s monthly payments must not exceed your ability to repay the loan and face your regular expenses. Moreover, there must be room for other non-budgeted expenses too, just in case.

Thus, most lenders require that the loan’s installments don ot exceed 40% of your available income at the time of applying for the loan. This is especially true for unsecured loans since the risk of default is higher due to the harsher loan terms. Besides, since the lender does not have the additional guarantee that collateral provides, it must be extra careful to avoid loosing his investment.

 

Fixed vs Variable Rates in Personal Loans

Fixed rates remain the same over the whole life of the loan but tend to be higher than variable rates when both compared at any given time. Variable rates on the other side change according to market variations and though the rates are initially lower than fixed rate loans if both loans are taken at the same time, these market variations can increase the rate to higher rates and turn the loan significantly more onerous.

Short Term, Long Term

Depending on the length of the loan a fixed rate or a variable rate will be advisable. Short term loans are not as risky as long term loans if you decide to go for a variable interest rate. However, short term loans are not so easy to afford even though the variable rate implies less interests. Thus, you will need to ponder these two variables to see if you can take advantage of a short term loan with a variable interest rate.

Long term loans are more risky because market variations tend to occur sooner or later and though the rates may decrease, they may also increase significantly. Therefore, on long term loans, a fixed interest rate is advisable as it will protect you from market variations and inflation too.

Inflation Expectations

The inflation expectations are another important issue. Inflation is an increase of the overall level of prices due to a depreciation of the value of currency. Since the monetary note is worth less, more money is needed to purchase goods which implies price raises. Unless salaries increase too, the purchase power of salary decreases worsening people’s ability to purchase goods, repay debt, and save.

When it comes to debt, taking fixed rate loans protects you from inflation because the monthly payments remain the same over the whole life of the loan. Whereas, on variable rate loans, the interest rate would rise to compensate for inflation. Thus, if economy experts are predicting high inflation figures over the next years, you need to consider applying for a fixed rate loan rather than a variable rate loan even if the interest rate is higher.

Conclusion

For those who are adventurous and like to save as much money as possible even by taking risks, variable rates are undoubtedly the way to go. They provide lower monthly payments and an overall lower amount of interests over the whole life of the loan.

However, for those who have a more conservative nature and prefer to avoid risks, fixed interest rate personal loans are a wiser choice. These loans can provide the funds needed at a slightly higher cost but also protect customers from market variations and inflation which can be disastrous for those that count only with a fixed income.