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Posts Tagged ‘loans’

The Benefits to Financing with Personal Loans versus Cash Advances

By On December 23, 2011 Comments Off on The Benefits to Financing with Personal Loans versus Cash Advances

Just in time for the post holiday blues of having to pay for presents, we have a guest post today that will provide some “news and insights” into getting ahead in 2012 by making some good financial decisions, planning ahead and preparing for you upcoming bills versus making quick decisions which often can carry a backlash of financial burdens.

Loans are a requirement each one of us has at some point in life. Be it for personal or professional purposes, education, medical or any other reason. From short term personal loans, to cash advances that will protect you against sudden emergencies, to long term mortgages for your house and vehicles, there are many different types of loans available nowadays to cater to your personal and business needs. These loans vary from the amount of loan, interest rates, types and other additional costs. Taking into consideration these factors, you should be able to choose a loan that suits your needs best.

Financial experts however, having considered today’s high loan rates, are of the opinion that it’s better to choose a personal loan over a cash advance any day. To best understand their reasoning, it is important to understand what a personal loan is and what a cash advance is. Cash advance is a loan that is taken out against your credit cards, which means it’s basically an option for cardholders to borrow actual cash or currency against their present credit balance. Cash advances generally carry a higher rate of interest charge than most of the loans available and in the long run have been proven to be more expensive.

Besides the higher interest, another clear drawback is the limited amount of cash one is able to loan at a particular time, since only a small percentage of the credit limit is available as cash to the card holder. It is rare to enjoy a grace/interest-free period with cash advances and interest rates charged have been known to go as high as 23% often. That being said, cash payments against cash advances can be helpful in some situations like a medical emergency. You also enjoy the convenience of taking out a currency advance against your credit card balance instead of depending on a debit card or cutting out a cheque.

Money that is accepted in a cash advance is accumulated to the amount that you owe the bank and can be very expensive, especially in the long run. Personal loans on the other hand help reduce costs and have better interest rates. Although a major inconvenience in getting a personal loan would be the amount of paperwork and formalities involved, getting one today has become more simplified with easier availability and door step deliveries. Though personal loans have a longer approval period, like employment check, age eligibility, residence proof and suitable guarantor, there are many reasons why choosing a personal loan would be beneficial to you in the long run.

Personal loans have a maximum interest rate of 12 to 30 % depending on your eligibility and the other criteria that are met while interest rates on cash advances can go up as high as 35 to 50 %. Another benefit of personal loans is that banks may waive your administration and processing fees once they have found your creditworthiness. With cash advances however, you will be charged non-refundable and compulsory fees in advance.

Finally, credit card companies have been known to apply low interests initially, only to raise the bar in the long term, forcing you to pay higher interests while paying off your card balance. Personal loans enjoy a constant rate of interest throughout the repayment phase. These are some of the reasons why personal loans, while traditional, are often better to gain better interest rates than going down the road of a payday loan or cash advance.