online cash advance
The role and risks of online cash advance lenders
Mention online cash advances and you are likely to evoke some extreme reactions. While on one side you will hear how online cash advances are a boon to the individuals and families in need, on the other side you might as well hear stories of how online cash advances ‘prey’ upon those in need. The focal point amidst all this remains the payday lender. Are the payday lenders the altruists who are out to alleviate the sufferings of the poor or are they the worst facet of capitalism, whose single point agenda is to make profit at the cost of happiness of others? The answer is ‘None of these’. Let us explore and understand this curious case ofonline cash advance lenders.
First, we need to know what exactly online cash advances are and what do they do
Online cash advances are short term cash advances that are made against your next monthly paycheck. They can range from anywhere between $100 to $1500. The main aim here is to provide you with enough cash to meet any urgent or otherwise important expenses, when your regular finances are unable to do so. Point to be noted here is that they are really easy and fast to obtain, so you are getting the cash you need in a matter of hours, irrespective of your credit score.
The role and risks of payday lenders
Thus payday lenders play a very important and often overlooked role of putting the cash back in your hands whenever you need it.
Keep in mind that the traditional financial institutions like banks would not lend money to anybody with a poor credit score. The payday lenders on the other hand take this risk of lendingirrespective of the credit history and thus expose themselves to the risks of lending to the potential defaulters.
Also unlike other loans, there is no collateral for online cash advances. So basically, the only security that a payday lender has is your next paycheck!
This would explain the so called ‘high’ interest rates on the online cash advances. The payday lender is taking a huge risk and some studies indicate that the average rate of defaulters for any payday lender is upwards of 25%. Thus the ‘high’ interest rates are only meant to shield these lenders from such defaulters.
In many states where the interest rates on online cash advances were capped, most of the payday lenders have gone bankrupt.
Predators or Preys?
Regarding the charge that the payday lenders target only the distressed, ask yourself, who would a Rolls Royce showroom target? Obviously, they target the super rich, those who can afford it. The same way payday lenders target their marketing efforts on those who need them, and the rich people often don’t need online cash advances!
Finally, in these times of recession when the economy is fighting the lack of liquidity because the regular lenders would just not lend, payday lenders could just be the saviors we need. They are injecting the liquidity back into the economy, while taking risks that the regular lenders are so unwilling to take.
While it’s true that there are a few bad apples amongst the online cash advance lenders who are giving a bad name to all of the tribe, but then it’s true for any business, so it’s up to the consumer to be careful.
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online cash advance