From time to time, some people run out of money long before they run out of bills to pay. In such a case, a person may need fast access to extra cash to purchase groceries, buy gas, get car repairs, or pay a utility bill before his next paycheck arrives. In such a case, he may turn to a company that provides direct deposit cash advances.
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 either 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 date agreed upon, which is often as little as 24 hours after the loan is approved.
Typically, a direct deposit cash advance requires the borrower to allow the lending company to access his bank account again when the time comes to repay the loan. In such a 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-upon day, usually the borrower’s next payday, the cash advance company takes the repayment out of the borrowers account automatically, along with any fees it charges for financing the loan.
Direct deposit cash advance loans may seem like a good option when money is tight and options are few. However, these loans typically charge financing fees that are incredibly high. In fact, the typical range for cash advance interest rates is from 300 to 1,000 percent.
To understand what kind of fees a person can face with direct deposit cash advance loans, consider a $500 US Dollars (USD) cash advance taken for 15 days; a borrower may have to pay $150 USD or more for borrowing the money for 15 days. When the due date comes, he would have to pay $500 USD plus $150 USD in finance charges.
If a cash advance loan borrower cannot pay the whole loan back on its due date, he may extend the loan for another 15 days while he attempts to come up with the balance due. If he extends the loan twice, he will pay $300 USD in fees alone. If he extends it four times, which is just 60 days, he will pay $600 USD in fees for the $500 USD loan. In the end, even if he has paid all of these fees all along, he is still required to make a final payment of $500 USD plus a $150 USD finance charge. This can cause dire straits for someone who is already in a financial bind.