Short-Term Loan Options

The first quarter of 2008 has been extremely demanding on consumers' pocketbooks. Crude oil and gas prices are reaching all time highs. Basic food staples such as rice, wheat, and corn are also increasing to record high prices as well. Unfortunately for consumers their wages have not increased as fast as the costs of basics goods. Some economists believe that the prices of these basics will decrease over time or that wages will increase so these products become more affordable.

However, this forecast gives little relief to consumers over the short-term and many consumers are turning to short-term lending solutions such as credit cards, personal loans, and cash advance loans to help meet their basic needs. There are many lenders willing to accommodate consumers looking for short term solutions. Before choosing a loan, borrowers should carefully weigh their options prior to choosing which loan product best meets their solution.

If a borrower needs cash for less than a month, a cash advance loan is a wise choice. Cash advance or payday loans are designed to help people meet short-term obligations such as unexpected expenses, car repairs, or medical emergencies. Lenders generally offer loans between $100 and $1,500. Borrowers are expected to repay the loan within two to four weeks depending on their next pay date. If the borrower cannot repay the loan within the time agreed upon, they can request and in most instances have the loan refinanced to a later date. Most lenders require an active checking account, proof of income, and proof of residency.

A smart choice for many people seeking a payday advance loan is an online solution. In the past few years many lenders have begun offering their products over the Internet to make it more convenient for consumers to obtain cash advance loans. Many lenders on the Internet are focused on ensuring customers have an exceptional experience with them. Borrowers should seek lenders who offer consumer safeguards such as:

1) Licensing in each state/province where they offer loans. By dealing with locally licensed lenders, consumers can be assured that they are provided safeguards that other unregulated lenders are not willing to provide. If a lender is locally licensed it should display the state issued license on its website.

2) Adhere to best practices of state and national associations. Lenders who belong to state and national associations such as Community Financial Services Association (CFSA), pledge to go above and beyond what state statutes require and work with borrowers to ensure they can afford and repay their obligations. Lenders who are involved in these associations are community minded and will not participate in unfair or deceptive advertising practices.

3) Clearly display the cost associated with the loan. Before a person applies for any loan he or she should ensure the fees associated with that loan are clearly displayed. Cash advance providers are required by law to clearly display all of the fees associated with their loans using an annual percentage rate (APR).

Although cash advance loans average about two-weeks in length, the APR serves as a good comparison tool between loan products. Some credit card and short-term products offered by other financial institutions hide the true APR of the loan with "hidden fees" such as participation charges, late charges, enrollment costs, and other seemingly innocuous charges. However, these add-on fees can rack up. For example, a $30 late charge on a $100 credit card balance can run a borrower 1600% APR. Consumers should ask their lender to include all of the fees associated with the loan in the APR so they can make an informed decision before borrowing.

With increasing demands on consumers' wallets, people should demand that legislatures and other policy makers protect their right to have access to credit. When consumer choices are limited, borrowers may be forced to utilize more expensive and time consuming credit options to make ends meet. Borrowers should patronize lenders who are committed to providing consumer safeguards and maintain a focus on providing exceptional customer service. When consumers utilize the best credit product and provider, they can effectively plan to overcome any short-term emergency or credit need.

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