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Why Wage Day Advances Are So High-Priced

Datum: September 09, 2011 09:37:36 AM
Autor: MGSumner
Kategorie: Chats & Foren

Wage Day Advances can be a perfectly useful service for those who have a desperate need for quick funds to see them through until their next payday arrives. Whether this is because of a cashflow problem, or an unpredicted expense, payday advance loans can help span the gap. Cash advance loans come at a price though - and it's a high one. Payday loans are widely regarded as one of the most expensive forms of legitimate credit out there, with astronomical rates of 1000% or more routinely encountered. Why are the interest charges so high? The first thing to point out is that wage advance loans are borrowed over a short term, while the regulation APR measurement of interest charges is designed for quantifying how much interest would be charged over an entire year. As hardly any cash advances are taken out for this long, APR numbers are perhaps not the optimum way of quantifying how costly they are in the real world. Nonetheless, the prices are substantive. You're paying for convenience and speed, as most loans can be in your bank within a working day, and also because of the lack of credit checks you're also to some extent paying for the risks taken by the payday lender who may lend money to people totally unable to repay it. You're also paying more because the finance companies know that people who need money desperately are prepared to pay more than those looking for longer term credit and are willing to shop around for a cheaper deal. It is this final reason that is the crucial one cash advances are so expensive - as an industry, payday lenders know that they are the lenders of last resort, and so can afford as a group to charge extreme prices for their doubtless popular services.

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