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Home / Finance / Personal Finance
Cash Advance Sector, its Unprecedented Growth & its Victims?
By:Nazir Hussain
“… Cash Advance ..the fastest growing business opportunity in the world…”
“Cash now approves in 7 easy steps in real time”. Qualify by answering these questions online.. Below is the list of actual questions that one company asks of its clients to assess their legibility:-
“…… I am currently employed? I am not bankrupt? I am employed and have been so for the past 6 months? I have no outstanding unpaid debts? I get paid by direct debit?…”
Provided you answer “yes” to the above simple questions, your address and employment status checks out OK. You are then approved and can start using the facility right away.
Cash advance is a very short term borrowing against income or salary payments into ones account. For example, if your salary is paid into your account on the 21st of every month. And, you need money on the 14th of that month just for grocery shopping then cash advance is your bank for that short term borrowing.
A $200 loan till payday which, incidentally, happens to be just 7 days away could cost you an extra $30 in interest charges. In percentage terms, this equates to 15% interest charge over a nominal period of just 7 days. The disturbing aspect of this business is:-
1)15% charge for interest over 7 days works out a massive 52 time 15% and that figure comes to 780%. This is simply too expensive for a small loan.
2)People at the lower end of the market tend to be the users of this service. Unfortunately, the sector of the market that can ill afford to pay such exorbitant interest charges for a facility that their own bank should offer at a much lower interest rates.
Why is this business growing so fast?
As illustrated in the above example, the interest charges of nearly 800% represent very good opportunities for new entrants into this market sector.. which was previously the controlled by the underworld and the loan sharks. Internet, by virtue of access, has opened up this industry to all would be entrepreneurs to offer their services and secure their payments against salary. There are numerous advantages for the loan providers such as:-
1)The loan amount is very small. An individual borrowing very rarely exceeds into thousand of dollars. $100 or $200 borrowing is more the norm per customer.
2)The risk associated with each loan is therefore very small. If in the unlikely scenario a customer does default for some unexplained reason then the total loss to the lender is simply the amount plus the opportunity cost. The lenders loss being say between $100 to $250. This risk is worth taking given the earning potential.
3)The case for a very good business model is clearly there. The continued and explosive business growth will encourage other market entrants to make their presence known as more and more shops and internet sites appear touting for business.
How are the losers?
The people at the lower end of income. All users of cash advance to improve their short term cashflow problems. These people happened to be the people who need to save their money rather than squander their hard earned income in interest charges. Finally, the authorities should put in place measures to protect the most vulnerable members of their society.
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Article keywords: money till pay, cash advance, express payday money, short term loan, payday loan, money till payday
Article Source: http://www.articles2k.com
Cash Advance for access to short term borrowing. Nazir says..use this facility if you need to but make sure you know wHat you are doing. Visit my site http://www.cashadbance4uonline.com & make an informed choice.
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