Cash Advance Stores: Havens for Some, Disasters for Others

One of the fastest growing industries during tough economic times always seems to be the cash advance business. Millions of Americans find themselves financially stretched at times, and just when it seems they can’t handle anymore an emergency comes along that requires liquid assets and fast. Cash advance stores have sprung up as a result of these needs promising fast cash with the ability to pay it back later. But just how does a cash advance or payday loan from a cash advance store work?

There are varying types of cash advance stores across the country that offer individuals access to fast cash in a variety of ways. Some of the most common cash advances offered by stores include:

• Payday Loans: Typically a pay stub is required and a small loan is issued based upon this.
• Title Loans: Individuals present a free and clear car title and a loan is issued against the credit of the vehicle.

All the varying types of advances offered by cash advance stores come with fees and interest rates and other charges. Before taking out any type of loan it is important than an individual understand the process and fees included with a loan.

Generally speaking an individual who goes into a cash advance store in search of fast cash must come prepared with their checkbook. The process starts with an individual writing a check to the cash advance store for the amount of their loan, plus a borrowing fee. The individual is then given their cash on the spot to use as needed. Most cash advance loans are for small amounts of money, usually just a few hundred dollars, and are also normally short term between two and four weeks. When the determined amount of time is up the cash advance store will cash the check you have written them. Individuals can also authorize an electronic withdrawal from their bank account instead of writing a check if they wish.

When the term of the loan is up and the company cashes the check, or electronically withdraws, for the amount authorized, if the money is in your account the loan is over. However, if you don’t have the money yet to cover the check or meet the electronic withdrawal amount, many cash advance stores will give individuals the option to “roll over” the loan and make your payments back to them at a later date. However, this comes with added fees and makes the loan even more expensive to take out. A report from 2006 by the Center for Responsible Lending showed that many borrowers end up paying $793 worth of interest on a $325 loan, on average. For many, this figure was a result of consistently rolling over their loan for months instead of repaying right away.

Individuals should be very careful when seeking a loan from a cash advance store. While some people can successfully navigate the murky waters of these short term, high interest loans, others will struggle to repay the money they have borrowed because they have deeper financial problems than just the current emergency that led them to take out a payday loan in the first place. Anyone considering the services of a cash advance store should carefully examine their finances and judge their ability to successfully and quickly repay the loan.