It’s almost too easy to get cash loans online but avoiding the debt trap is harder than you thing
It’s likely you know the story. Your car breaks down at the worst possible time. You just got done paying the bills and have zero money left in checking. No car means no job which means no money so you don’t have a choice, you need cash now. You do a quick Google search for cash loans online and are surprised how easy the process looks. You might even be able to get the loan in your bank account that day.
And that’s when the problem starts. Paying $45 on a cash loan of a few hundred doesn’t seem like much at first but it adds up fast. Paying the first loan fee means you’re a little short on your next payday so you refinance the loan for another $45 to push it down the road a little.
Knowing how easy it is to get the money makes it too easy to take out a few more loans as well. Pretty soon, you’ve paid a few hundred dollars in cash advance fees and an interest rate that amounts to 500% a year…and you’re no better off than where you started.
I know because I’ve been there. In fact, the story is almost exactly what happened to me in 1998. I didn’t go online for a cash loan but went to the old school equivalent, the payday loan store.
Sometimes you don’t have a choice and you need fast cash. That’s fine but it’s too easy to rely on quick cash loans online. Learn how to get the money you need and how to avoid the payday loan trap.
How to Get Cash Loans Online for Emergency Situations
Payday and cash advance loans are a billion-dollar industry so it shouldn’t surprise you that the companies make getting loans online as easy as possible. The loan process here is for Check into Cash but they are nearly all identical. The online application has just five boxes to fill out; first and last name, email address, cell phone and zip code.
There really aren’t many requirements for cash loans online. Most payday lenders will approve anyone as long as they make a few hundred a month and the lender can make loans in the borrower’s state. A customer service rep will usually call within a couple of minutes to get your income and bank account information. You’ll then get an email with the loan details which you’ll sign online.
Your cash loan is deposited into your bank account, usually within 24 hours or the next business day. The loan amount plus the fee is debited from your account in two weeks or when the loan is due.
That’s all it takes to get an online cash loan. Some states require the lender to get emailed copies of pay stubs or a bank statement but those are easily scanned and don’t hold up the process much.
Again, don’t think because it’s an easy process that it’s the best financial move you can make. Usually easiest isn’t best anyway, right?
We talked about how much payday loans really cost in a prior article, describing the usury laws that limit the amount of interest you pay on credit cards and other loans. Payday and other cash loans websites get over the usury laws because they charge a ‘fee’ on each advance rather than an interest rate. Don’t be fooled by the cash advance fee, it still amounts to paying interest on your loan. There are some laws that protect borrowers from high payday loan fees but interest rates still go as high as 500% in most states. That’s like paying $1,500 just to borrow $300 on a loan.
But there are circumstances when you need a cash loan and can’t wait for a few days for alternatives in personal loans. I highlighted some of the best payday loan sites as well as other alternatives in another post. Just because you need fast cash doesn’t mean you should have to pay the highest rates.
How to Avoid the Quick Cash Loans Trap
Avoiding the cash loans trap starts with budgeting. Yeah, I know it’s easier said than done. I’ve been there. What helped me was what I call ‘turning my budget upside-down.’ Instead of taking your expenses out of your income first only to find that you’ve got no money left for savings, try taking out money for saving first.
Start with saving a little each month, maybe $25 a paycheck that goes into a Discover Bank High Yield Savings account immediately. If you don’t have enough to cover expenses, this forces you to cut spending a little without foregoing saving.
Besides a savings account, you should also be putting a little money in an emergency fund. Building up a month or two worth of expenses in an emergency fund will help pay the bills and avoid online cash loans when ‘life’ happens. Your savings account shouldn’t be used for those unexpected bills but can be if your only other choice is a payday loan.
The best way to avoid the payday loan trap is to increase your credit score so you have more loan options. If your FICO score is 580 or higher then you can get a personal loan from Avant for a fraction of the cost you’ll face on a cash advance. Avant offers personal loans of up to $35,000 for terms of up to five years and an interest rate way below cash loans. The process is nearly as fast as payday loans and money can be in your bank within a couple of days.
Increasing your credit score to the point where you can get cheaper personal loans is easy with these 21 steps to fix bad credit. You’ll have better credit within a few months and can save hundreds on loans.
Cash loans online can save you in a jam but it’s a tightrope and there’s no net to catch you. It doesn’t mean you need to be afraid of debt but you need to know how to use it and how to avoid the payday loan trap of constant refinancing.