Cash Advance Online for Americans: Take It or Break It?
Cash advance online services allow Americans to borrow money to meet their financial needs today. But high borrowing costs often bring more harm than good.
In 2021, the market of lending services kept overcoming the consequences of the pandemic. In 2022, we might continue experiencing unusual tendencies.
Recent Trends in Cash Advance Services
Over the last decade, traditional personal loan usage has been on the decline. But a type of lending service is filling the void. With incomes down during the pandemic, consumers start worrying that they might flock to predatory financial services.
Annual percentage rates for short-term advance loans are determined by state legislative measures. Cash advance APRs frequently reach three figures in some cases. According to the Federal Reserve, the average APR for credit cards in 2021 was estimated at 15.09%. Despite the potential risks, some consumers see them as the only option in critical financial situations.
The Idea of Cash Advance Services
Cash advance services promise quick cash when Americans borrow money and repay it from their next paycheck. The fees and voluntary payments are mainly charged by earned-wage services, also called “tips.”
Traditional personal loans have a long and controversial history in the United States. Over the years, lawmakers have tightened restrictions on lending companies. Despite regulatory efforts to restrict their operations, personal loans are still legal in most states.
Cash advance services appeal to the most economically vulnerable Social categories. Almost 9 million American households use alternative financial services, including cash advance every year. And they are lower-income earners that don’t have enough money now and need help to make it through the next couple of weeks or months.
Perks of Using Cash Advance Apps and Services
Due to the modernization of lending services, many private funding companies develop their apps. This is how they try to make their services more affordable to average Americans. For example, the Earnin app provides advances ranging from $50 to $600. To qualify for an advance, customers have to specify some personal information. The app requires them to provide access to their bank balances.
When it comes to cash advance, a mobile app monitors user GPS data to ensure a borrower’s location. Once cash advance hits and the direct deposit falls down, Earnin automatically calculates the advanced amount with no interest and no fees involved. In fact, most apps belonging to online lenders are based on the same mechanism, which is fast, easy, and convenient. Nevertheless, there are still some critics and investigators claiming that the tip might exceed predatory lending caps and skirt state regulations in 2022.
Should You Avoid Cash Advance?
Financial difficulties can’t be avoided. What you can do is to keep them under control. According to The Consumer Financial Protection Bureau, there are several steps to take before borrowing money:
- Select a non-profit organization, community support group, or people you know to take money from.
- Minimize your payments by negotiating with your creditor or debt collector
- Contact your financial institution to apply for a cash advance services that have more affordable interest rates compared to standard personal loans.
- Proceed with emergency funding to build up your contingency plan.
The cash advance apps like Dave or Earnin should be used only if you know that you can cover your debt on time. This way, you will prevent an income hole in your
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