Many households that lack emergency funds to cover unexpected expenses like home or car repairs are turning to cash advance loans. These personal unsecured loans are a way to spread out payment of these surprise expenses over time.
Cash advance loans are also available online, from companies that may provide the loans themselves, or who refer consumers to a lender or lenders.
One positive of online cash advance loans can be a fixed monthly payment. For example, the LendingClub offers loans up to $35,000 with an interest rate based on your credit rating. you make fixed monthly payments with no prepayment penalty. So paying the loan off earlier can save you interest payments, depending on the loan terms.
LendingClub works with investors who fund the loans. While not all applicants will be approved, LendingClub claims it’s able to base decisions on more than just your credit score, using online data and technology to assess risk.
Some providers of online cash advance loans actually serve as brokers, providing access to some of the best personal loan lenders with one application. Thus, you can choose the terms, including rate, payment and repayment period that works for your budget. One such lender is Greenstarcash.com, which provides smaller loans based primarily on your income. They also take your payment directly out of your account at the agreed upon date.
Other online cash loans can resemble payday loans in that they carry very high interest rates. But the ability to pay down a loan in installments can make it easier to manage repayment. The amount you can borrow is much smaller, typically limited to no more than $1,500.
For instance, Spotloan offers loans up to $800. While APR and payment amounts will vary depending on your term and payment schedule, Spotloan says a borrower who takes out a $600 loan with a 390 percent APR and makes 13 payments of $108 every two weeks will pay back a total of $1,404 with interest and fees. While there is no prepayment penalty, the interest payments are not reduced by an early payoff.
A benefit of obtaining cash advance loans online is speed. If you are approved, you are notified right away. The loan papers can be completed from your computer, with funds in your bank account within 24 hours depending on the institution and their particular terms.
The wait for funds on larger loan amounts can be slightly longer, but all usually take advantage of direct deposit to deliver the loan proceeds.
Yet consumers should be aware of the potential risks. The Illinois Department of Financial and Professional Regulation warns that unlicensed Internet lenders frequently charge interest and fees above what is allowed by regulators in your state. If you are defrauded by an Internet lender, it may be impossible for you to recover your losses, particularly if the company is based outside the United States.
To protect yourself, Illinois regulators recommend that you:
- Make sure you understand and agree to all loan terms, especially the interest rate and fees, before faxing any signed documents to the lender or before typing in your “electronic signature.”
- Print out and retain your loan contract and any other documents that you have e-signed. Also print out the name and mailing address of the lender. You will need this documentation if you are defrauded or overcharged.
- Never pay the lender an upfront fee before you get your loan.
Also keep in mind when loan shopping that for larger loans, you should be able to secure a better interest rate if you have good credit. Interest rates on smaller loans are similar to payday loans in that they often carry a significantly higher rate, with terms based on monthly income.
It’s important to read all of the fine print. Online cash advance loans may have terms that can weaken your position as a consumer if there is a dispute about the debt itself. It is also important to note the cost of the origination fee. A cash advance loan that offers a lower APR may charge a higher origination fee. Before taking out one of these loans, every borrower should carefully read over the terms of their loan agreement.
The monthly payments on online cash advance loans may be greater than those offered by a bank or credit union. Instant cash loans are not meant to solve long-term financial issues and must be used responsibly.
The bottom line is that the ability to obtain cash advance loans online gives you another tool in your financial arsenal, but cash advance loans must be used responsibly so that you don’t dig yourself a bigger debt hole.
Tracy Sherwood-Knepple is a business and finance writer. She holds a degree in mass communications from Indiana University.