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Direct deposit cash advances provide quick access to short-term loans, but come with high financing fees ranging from 300 to 1,000 percent. Borrowers must repay the loan through automatic withdrawals from their bank account, and extending the loan can lead to even higher fees and financial hardship.
Occasionally, some people run out of money long before they run out of bills to pay. If so, a person may need quick access to extra cash to buy groceries, buy gas, fix a car, or pay a bill before their next paycheck arrives. In that case, he can turn to a company that provides cash advances via direct deposit.
A direct deposit cash advance is a type of short-term loan. It allows a person to borrow money, usually for about seven days to four weeks. When a borrower is approved for this type of loan, the money is automatically deposited into his checking or savings account. This means there is no loan check to wait for in the mail. The borrowed money is automatically deposited into the borrower’s account on the agreed date, which is often as little as 24 hours after the loan is approved.
Typically, a direct deposit cash advance requires the borrower to give the loan company access to his or her bank account again when it comes time to repay the loan. In that case, the repayment is set up as an automatic withdrawal and the borrower doesn’t have to lift a finger to repay the loan. On the agreed day, usually the borrower’s next payday, the cash advance company automatically takes the repayment out of the borrower’s account, along with any fees charged to finance the loan.
Direct deposit cash advance loans may seem like a good option when money is limited and options are few. However, these loans typically charge incredibly high financing fees. In fact, the typical range for cash advance interest rates is 300 to 1,000 percent.
To figure out what kind of fees a person may face with direct deposit cash advance loans, consider a $500 US Dollars (USD) cash advance taken over 15 days; a borrower may have to pay $150 USD or more to borrow the money for 15 days. When the due date arrives, he would have to pay $500 USD plus $150 USD in financial expenses.
If a cash advance loan borrower cannot repay the entire loan on the due date, they can extend the loan for another 15 days while they try to recoup the outstanding balance. If he extends the loan twice, he’ll pay $300 USD just for fees. If he extends it four times, which is just 60 days, he will pay $600 USD in loan fees of $500 USD. In the end, even though he’s paid all of these fees all along, he’s still required to make a final payment of $500 USD plus a $150 USD financing fee. This can cause serious hardship for someone who is already in financial trouble.
Smart Assets.
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