Be Careful with a Cash Advance

Online cash advance companies are proliferating. These lenders provide short term loans, sometimes called payday loans, of up to $500 that are repaid within a week or two and are secured by your next paycheck.

The lenders tout the loans as a short term cash flow solution, not a long term debt reduction or consolidation strategy. This is the truth! Some loans require a $20 finance charge per $100 borrowed. That's over 500% annual interest!

I could see certain circumstances where a cash advance loan might be necessary. An unexpected car repair might fall into that category, or perhaps an unexpected (and uncovered by insurance) medical expense.

While it may seem enticing to have a few hundred dollar cash advance wired into your bank account in an emergency, you should be VERY CAREFUL how you use these loans. Such a loan should only be used in an absolute emergency as such prohibitively high rates make them a losing proposition in most cases.

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