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Cash Advance - How Does It Work?
If you want a cash advance or a payday/paycheck loan, you
usually get a personal check. Some companies use your bank
account or credit card in addition to or instead of a check. This
means that you have to write a check that is to be cashed or you
have to agree to have an amount withdrawn from your bank account
at a certain date in future (usually 14 days). After filling-in
the agreement or contract you get a sum of money that is less
than what you have agreed to pay. The sum is smaller because the
difference is the "fee" for the loan service. Why would the
company loan you money like this? Because loaning out money in
this way and getting these "fees" really brings them a huge
profit at your expense.
If we assume that you borrow $200 and the "fee" is of $15 for
each $100, within 14 days you will have to give back $230 for the
$200 that you borrowed. If by borrowing the $200 you avoid paying
a $100 late fee or penalty on something, then it is worth the
effort. But if you just need the money for yourself, the price is
too high.
Simple math shows you that you are paying 15% interest for a
14-day loan. That means 3785 dollars compounded interest per
year. So now you can understand why lenders are so very happy to
give you the money. If they loan you $100 and you pay them back
$15 more in only two weeks and they loan out the $100 again along
with the $15 they got from you, by doing this for one year, they
will turn their $100 into $3785. This is the proof you needed
that it's better to lend them your money than to borrow from
them.
Dominic is the author of this article. This article may be
reproduced on websites subject to credit being given to the
author, and a link to this website. If you would like more
information go to http://www.cash-advanced.com
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