Thursday, November 30, 2006

About a Different Kind of Payday Advance Loan

By Paul Rizzo
Payday Loan Writer

For the average consumer, “loans that fit in with your lifestyle” ideally would be fast and easy to get and would never require repayment, states an article in the investing section of The Chicago Tribune.

As long as the real-world lenders want their money back with interest, however, the best loan deals will never be as easy as consumers want. What’s more, any place offering fast, easy money is going to exact a price for the convenience of those online cash loans.

CashSo when the writer saw a television ad for promising fast bucks to fit the consumer’s busy and stressed lifestyle, it not only seemed too good to be true, it looked like a Stupid Investment of the Week.

In most circles, taking out a bad credit payday loan does not constitute an investment, but it qualifies because it’s a commitment of money, over time, to get an expected “return,” namely the money that the borrower gets up front.

On the surface, and in the television ads, the loans look and feel a bit like payday advance loans a form of lending that typically is fairly abusive to the customer. In a payday advance situation, the lender is entering the deal based on the borrower’s paycheck, rather than the credit report.

Repayment terms are notoriously bad. The loans are designed to be paid back in a few weeks, but the annual percentage rate charged on the money often runs well into the hundreds.

CashCall clearly is a step above that level, to where its commercials might attract an average consumer with perhaps a slightly above-average consumer debt load. There is a credit check, but the documentation is light, typically amounting to a driver’s license and a voided check from an active checking account.

Rates on these cash loans: But try to find the rate and terms of the loan on the firm’s website and you are out of luck. The no fax cash loan amounts actually vary by state.

In most states, loans run from $1,075 to $5,075, though the consumer never sees the last $75 of that dough, because it goes to the lender as an “origination fee.” It not only adds to the effective interest rate you are paying, but because it is part of the loan, it also accrues interest.

Boy, does it ever.

When you call to get the effective rate on the loan, CashCall service reps break the news:

The annual percentage rate on the $5,000 loan is 59 percent. If you do not pay the no fax payday loan off early, you’ll make $254 monthly payments for seven years. That’s more than $21,000 in payments.

That might make you want to take out a smaller loan. The $2,600 deal that service rep Ken offered carries an annual percentage rate of 96 percent.

Ken and several other phone reps were clear that the faxless cash advance loans are not to be used for long-term financing. Asked to compare the loans with a cash advance that a consumer might get from a credit card issuer, Ken asked, “If you have any available credit, why would you be calling someone like us?”

“Make no mistake, this is geared for borrowers that have less than perfect credit, or who lack established credit,” says Greg McBride, senior editor at “You’re paying for convenience, but you’re also paying for your past credit mistakes, and if you can’t pay this off quickly, you may be making another credit mistake in the process.”

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