Does a Quick Cash Advance Really Help?
Avoid High APR Personal Debt with Proper Money Management
Mar 19, 2009
With additional part-time work and over-time so difficult to find, many families are tackling short-term money problems with a quick cash advance. However, the high APR charged on credit card cash advances, payday loans and pawnbroker loans means that long term money management may be compromised and long term personal debt created.
How do Quick Cash Advances Work?
A quick cash advance is regularly the only option available to those with money problems and a bad credit rating. Cash advances invariably charge a high APR, but are designed to help with short term money management. For example, pawnbroker loans and payday loans are regularly advertised as a means of paying the mortgage, rent or more frivolous purchases, such as foreign holidays.
What is the Real Cost of Quick Cash Advances?
The rate of interest charged on quick cash advances is a high APR of up to 1000%. This means that payday loans charge customers the equivalent of £20 for every £100 borrowed each month. The rate isn't much less on pawnbroker loans. Those seeking a credit card cash advance will be charged £3 per month on every £100 borrowed. This, to some extent, reflects the bad credit risk posed to lenders.
Short Term Money Management or High APR Personal Debt?
Taking out a quick cash advance can help with essential household bills, such as paying the mortgage. Cash advances aren't secured on the family home and can help prevent house repossession. Payday loans and pawnbroker loans help greatly with short term money management.
Whilst a quick cash advance has it's advantages, it can serve to exacerbate money problems and increase personal debt. The high APR charged on a cash advance means that there is less money available the month after. This can create a cycle of dependency; Payday loan and pawnbroker loan customers are often the same people each and every month.
Chris Tapp of the Donal MacIntyre programme stated that, "We would only ever want to see people using no credit-check payday loans if they have a desperate, one off short-term need and there is absolutely no other option." Quick cash advances should never be perceived as a source of long term money management.
Whilst it is sensible to tackle urgent money problems with a quick cash advance, it is important to avoid a cycle of dependency. Taking out a Payday loan or pawnbroker loan each month leaves less money available the following month because of the high APR charged. Those struggling with personal debt problems should always seek guidance from a qualified debt counsellor.
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