If borrowers urgently need money, they might consider a small dollar loan such as a cash advance. One might have heard conflicting things about how cash advances can be convenient but have high fees and not be sure if it’s the best choice in terms of finances. Here are three essential steps everyone should take before using a small dollar loan.
Understanding one's options
When one needs money ASAP, a cash advance comes to mind first. But in fact, the borrower may have more options when it comes to getting money exactly when needed.
- Cash Advance: Cash advances typically offer a few hundred dollars and are typically paid back on the next payday.
- Title loans: Title loans are similar to cash advances but backed by collateral such as a car title — as such, one might be able to get a higher loan amount but risk losing their car if the loan isn't paid.
- Installment loans: Installment loans are unsecured loans that may have higher loan amounts up to thousands of dollars. These loans are paid back over time in smaller payments.
- Line of credit: A line of credit works similarly to a credit card, but with the flexibility of cash. The borrower may have a maximum limit to the line of credit and can withdraw cash whenever needed. The borrower only starts to accrue interest on the line of credit when money is withdrawn and only for that amount.
Using a direct lender
If the borrower has decided to take out a cash advance online, the borrower should use a direct lender with a name and website they recognize. Some “personal loan lenders” may set up websites to look like direct lenders but will sell the financial information to third parties and give one the offer that has the biggest cut for them.
Using a licensed direct lender will let the borrower see the repayment terms of the loan upfront and keep financial information secure.
Looking for transparency around fees
Reputable lenders will be transparent about the interest rate and fees associated with their loans.
One way to avoid lenders that might not be following best practices when it comes to transparency is to look for members of the CFSA — the Community Financial Services Association of America. Members are required to engage in truthful advertising and work with customers on repayment. It’s also essential to always follow a repayment plan on time to avoid any unexpected fees.
Notice: Information provided in this article is for informational purposes only. Consult your attorney or financial advisor about your current financial circumstances.
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Original Source: Advance America Answers: What Borrowers Need to Know When Looking for a Small Dollar Loan for the First Time