The Only Cash Loan Definition and Payday Cash Loan Breakdown That You’ll Ever Need

Roughly 14% of the United States population lives below the poverty line. A higher percentage of individuals are scraping by just above it.

When a child gets sick, a car breaks down or a leak springs in those people’s homes, they’re often left wondering how they can remedy the situation while still keeping up with vital bills.

As a solution, many seek payday or “cash loans” as they’re sometimes called.

If you’re unsure of the cash loan definition and whether or not this type of borrowing product can help you, keep reading. Below, we break down what cash loans are, how the term is commonly used and explore the ins and outs of payday cash loans which are among the most commonly applied for.

Cash Loan Definition

Putting a definition to the term “cash loan” can be challenging because the term is sometimes used to describe a variety of loan products.

At its foundation, a cash loan is any kind of lending product that issues borrower’s cash. That definition covers everything from credit union issued short-term loans to long-term business loans issued by traditional banks.

While the term cash loan is broad, generally, people reserve its use for referring to payday loans which will be the focus of the paragraphs that follow. Payday cash loans are quick lending products that borrowers take out with minimal barriers. Amounts borrowed are typically equal to or less than what a borrower expects to receive on their next paycheck.

Why Are Payday Cash Loans so Popular?

As we touched on, the reason why the cash loan definition tends to be synonymous with payday loans is that payday loans are among the most popular cash loan products. As a matter of fact, about 10 million Americans take out at least one payday loan on an annual basis.

Why all of the interest in payday cash loans? The lending product carries several benefits which include:

Being Fast to Acquire

Payday cash loans can be applied for and received in minutes if you’re borrowing from a lender in your community. All it takes is sharing your personal information and proving that you have your basic affairs in order (possessing a checking account, having an ID, etc.).

Having Plentiful Lenders

Throw a rock in a non-affluent community and it’ll knock off of a payday loan shop or two. Payday cash loan purveyors are plentiful which means more opportunities to borrow and more competition between lenders when it comes to interest rates and fees.

There is also a growing number of reputable online payday lenders that can wire money into your checking account in as little as 24 hours.

Offering Refinancing Opportunities

If you’re carrying aggressive debt that you need to get off of your back, payday loans may be a great way to pay off the lender that you want to stop working with. Refinancing with a payday loan could mean paying less in interest and fees each month when compared to your old lending products.

Having No Credit Barriers

For borrowers that have a bad credit score, payday cash loans are particularly helpful. Almost no payday loan providers look closely at your credit when making a lending decision. Instead, they’ll consider how much money you deposit into your checking account each month.

Being Guaranteed

To attract as many customers as possible, some payday lenders offer guaranteed approvals. That means, so long as you have a checking account and an ID, you can be sure that a lender will give you at least a portion of what you’re looking for.

What Issues Exist with Payday Cash Loans?

Understanding the cash loan definition means understanding cash loan drawbacks. When you’re taking out a payday cash loan, here’s what you need to watch out for:

High-Interest Rates

The number one issue that you’ll run into with payday cash loans is that they tend to carry very high-interest rates. Some states have put caps on the amount of interest that a payday loan lender can charge. Others have not.

When you’re taking out a payday cash loan (or any kind of cash loan for that matter) pay close attention to what your interest rate is and understand how much your loan money will cost you if paid off on time. Also, ensure that your interest rate is fixed and not variable.

Ample Fees

In addition to high-interest rates, many cash loan products look to make money off of customers by requiring them to pay fees. These fees include late payment fees, early payment fees, origination fees and more.

Any time that you take on a loan, ask about the product’s fees and how you can avoid them. If several unavoidable fees are featured in your loan product, it’s best to keep shopping around.

Fly-by-Night Lenders

As the online arena gets increasingly filled with payday cash loan providers, we’re seeing a lot of non-reputable players get into the game. These players have flashy websites, promise transparency and then later drive your loan balance up via several, undisclosed vehicles that may even be illegal.

Be cautious when borrowing from a cash loan lender, especially one that you find online. Fighting a lender that you can’t visit in person can present a challenge.

Affiliations With Collections Agencies

Many payday cash loan lenders have tight-knit relationships with collections agencies that they sell debt to. If you fall behind on your cash loan and have your debt moved to a collection office’s desk, you can expect ample phone calls and other forms of harassment that, again, may be illegal.

The best way to avoid that is to pay your debt off on time and vet who you borrow money from carefully.

Are There Better Alternatives to Payday Cash Loans?

We mentioned at the beginning of this post that the cash loan definition is so broad that it touches several lending products. As it turns out, many of those alternatives may be more helpful to you than popular payday cash loans.

Here are a few ways that you can get your hands on cash loans that carry better terms and less headache:

Take Out a Short-Term Loan Issued Through a Bank

Banks and credit unions make a living giving out cash loans. Their loans typically carry fair interest rates and the repayment periods they offer are manageable.

Unfortunately, short-term loans issued through formal institutions will look at your credit to determine your borrowing eligibility. This requirement is why many people end up having to turn back to payday cash loans.

If you’re unsure how your credit looks, consider requesting your free report from the major credit bureaus. There are also several online services that can give you your credit score in seconds.

Look Into Government Options

There are government-backed programs that can get cash to individuals and business owners that need money. Stafford loans, FHA loans, and SBA loans are just a few examples of government lending vehicles.

Borrow From Friends and Family Members

Few people in this world will give you a cash loan without an expectation to collect interest. Your friends and family members may be among those rare lenders.

If you have a personal network that’s vested in your well-being, don’t be afraid to let them know that you need some help. You might be surprised by how quickly the people that love you are willing to come to your financial aid.

Look Into Credit Cards

Credit card usage is what gets many people into bad financial spots in the first place. The truth is though, when compared to some payday cash loans, credit cards could represent a good deal.

While credit cards don’t give you access to cash out of the box, most offer cash advances which enable you to withdraw money from an ATM for additional interest. You’ll have to look into your credit card’s traditional interest rate and combine that with the additional rate that cash advances incur to see if taking out a cash loan from your credit card company trumps your payday cash loan options.

Are Cash Loans of Any Kind Right for You?

There are a lot of lending products out there. We hope that, as we’ve dug into the cash loan definition, you’ve managed to wrap your head around popular payday cash loans and alternative products.

Always be vigilant when taking out cash loans of any kind. The more closely you vet lenders and read terms, the less likely that you’ll be to fall into financial despair.

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