Defaulting on a Cash Advance Loan
June 21st, 2010
A cash advance loan-also known as a payday loan, payday advance loan, quick cash loan , no credit check loan and postdated check loan-maybe the quickest and most convenient way to get additional funds to cover unexpected expenses, but in reality, this is one of the most expensive loans that you can get. Because this is a high-risk loan that does not require collateral and a credit check, it has a shorter period for repayment and a higher interest rate than normal loans. It is intended for short-term cash flow needs, not as a solution for long-term debt.
Even with the potential drawbacks, people are not put off from getting a short-term cash loan, especially if they are in serious need of additional funds and have no other way to get it. This is also an attractive option if you have a low credit score and have been turned down for other types of loans. However, defaulting on a short-term cash loan can have more serious consequences than a regular loan.
With most other loans, if you are late in your payment, your interest rate does not change dramatically. Aside from owing your lender, defaulting on payday loans will also mean bounced checks when the lender tries to collect on your debt. Your bank will charge you a penalty for this, and what’s more, too many non-sufficient funds (NSF) charges will give the impression that you don’t pay your bills or can’t pay them. This will affect your chances of getting another loan, not to mention have a significant negative effect on your credit rating.
While you cannot be arrested for defaulting on a loan, you can still be taken to court and billed for the loan and lawyer fees. The lender could also send your loan to a third-party collections agency, which can make your life difficult with harassing phone calls at work and at home. In some cases, the collections company can charge you twice the amount that you owe the original lender. This is not only expensive, but is embarrassing as well.
It is important to read the fine print in any financial transaction, such as a cash advance. Make sure you understand what happens when you are late in your payments. Aside from the interest rate, all additional fees should be spelled out as well. It might turn out that you will be paying interest on additional processing fees, not just the amount you borrowed.
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