Those who own businesses are interested to know the basic characteristics of these unique loans, and three of the most common questions that they want answered are covered below.
1.What is a Business Cash Advance Loan?
As its name suggests the business cash advance loan is an advance in cash paid to a business owner based on their projections for future revenues. In other words the lender determines how much money the business will make over the next several months and then offers to make a cash loan in exchange for a cut of that future business income.
The loans are repaid by designating a share or percentage of the business owner’s sales and that is typically done by guaranteeing the lender a portion of the money made from credit card receipts. If you take out a loan this month, for example, you might repay it by giving the lender payments that are a percentage of your credit card sales over the next few months.
Because you are paying based on a percentage and not a set payment amount, if you record higher sales you’ll pay back more of the loan – but during months that your credit card sales are less you will be paying less money to the lender.
2.How Do Business Cash Advance Loans Differ from Bank Loans?
There are two aspects of business cash advance loans that make them especially unique and different from your typical commercial business loan.
• One way that a business cash advance loan differs from your typical bank loan is that there is no fixed repayment schedule – a feature that is always found in conventional commercial loans. So in other words you don’t have to make payments each month in equal installments like people are accustomed to doing with car loans and mortgages.
• The second big difference between these loans and mainstream bank loans is that the cash advance loan industry does not have to follow the same legal guidelines that banks and other traditional lenders do. So merchant cash advance loans are not regulated by the government or the banking industry the way that other commercial loans are.
That has created some resistance from the traditional banking and loan community, because they feel that cash advance loans should also be subject to the same kinds of regulatory oversight and scrutiny that their own lending practices must adhere to and follow. Because cash advance business loans operate in a rather unregulated environment, some lenders charge very high rates of interest. It is not uncommon for a business cash advance loan to cost the business owner interest that works out to more than a 100 percent annual percentage rate or APR – and some lenders will even charge 200 percent APR.
That would never be allowed with a typical bank loan, but for lots of business owners who have been turned down by banks these cash advance loans are useful and helpful, despite the high costs.
3.Are These Loans Here to Stay or Just a Product of the Recession?
The idea of cash advance business loans is relatively new, but it started before the most recent recession and has been part of the lending industry since the beginning of the 21st century. These days, of course, because of the credit crisis and the inability for many businesses to find financing the niche for merchant cash advance loans is growing rapidly.
There are dozens of companies who now make these loans across the USA, and it looks like they are definitely here to stay because they are doing a brisk business because although they carry high rates of interest they are relatively hassle-free and easy to get loans that can be processed fast and get business owners the cash need with hardly any questions asked.
Currently cash advance lenders constitute what some experts estimate is about 10 percent of the market for commercial loans to businesses, and that figure is expected to either stay steady or continue to grow. The one wild card or variable that could change those projections is if Congress decides to start regulating the cash advance sector the way that banks are governed. There are lots of new financial institution regulations coming down the pike this year, but it is unlikely that those will impact the business cash advance industry anytime soon.
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Here are three of the main questions on people’s minds – along with some informative answers – to help clear up confusion about cash advance payday loans and what they are all about in today’s financial marketplace.
1.How Do Cash Advance Payday Loans Work?
A cash advance payday loan is a loan made to you before your actual payday. The reason that people like these kinds of loans is that it is easy to run out of cash before that next payday rolls around, and once you get tapped out the bills and other expenses pile up and create headaches, stressful decisions regarding household finances, and other kinds of problems. But if you can borrow some money with a promise to pay it back on payday then that can bridge the gap and put money in your pocket when you need it the most.
The way lenders benefit from these kinds of loans is that they charge you a fee or interest for the loan. You get money sooner than you normally would and the lender gets paid for making that happen. That’s the general mechanics of how a cash advance payday loan works.
2.Are Cash Advance Payday Loans a Good Deal or Not?
The answer to that question is that it all depends on your financial situation. Let’s say that you have some emergency money stashed away in the bank, in your cookie jar, or in the form of a line of credit you can access when needed. In that case you probably have no reason to use a cash advance payday loan because you already have yourself covered when you run out of money ahead of payday. These cash advance loans charge high interest rates, and if you have other cheaper ways to get cash then you’ll be smart to use those more affordable methods instead.
But what if you don’t have any other way to get the funds you need to tide you over until your paycheck comes? In that case you might be a prime candidate for one of these loans, because they are tailor made to help people in your situation – who just need that paycheck a week or two ahead of time in order to make it through from one payday to the next without bigger problems. If getting the money this way – even though you have to pay a hefty rate to do it – saves you more money or aggravation in the long run, then it might be a good thing for you. Consider it an emergency source of urgent cash that might not be a great deal in terms of what it costs, but it could pay for itself anyway in terms of lowering your stress levels or preventing you from incurring even greater financial troubles.
3.When Should I Consider Using a Cash Advance Payday Loan?
You should consider using a cash advance payday loan in situations where you have no other options and it will save you more money that what the payday loan costs you.
Here’s a classic example: Let’s say you run out of money in your checking account. You have three checks about to hit the account, and all of them will bounce unless you put $300 into the bank account fast. Payday is two weeks ago, and you have no other way to come up with the cash. You have a choice. You can bounce those checks – and get charged about $25 dollars each plus get a bad report on your credit history file. Maybe one of the checks is for your utility bill and another is for your phone, so you also risk getting your electricity and phone cut off. If that happens you’ll have to pay even more money in the form of penalties and deposits to get those things turned back on.
Or you can go to a lender and borrow $300 with a cash advance payday loan to put in the bank account and cover those checks. When payday comes you pay back the loan and that’s the end of that. No cut-off utilities, no bad checks, and no other penalties or bad repercussions happen. You might pay $50-$75 for your cash advance loan in that $300 example we used. But when you add up all the problems you avoided it makes sense to use that resource to avoid the even bigger and more expensive problems.
That’s the nuts and bolts of cash advance payday loans and how and when to use them to your benefit at times when you’re stretched for cash.
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Here is a list of three of the most often asked pre-owned loan questions, along with some answers intended to help make the pre-owned car buying and loan application process go easier and smoother.
1.How Does a Pre-Owned Car or Truck Loan Differ from a New Vehicle Loan?
The biggest difference between a pre-owned loan and one for a new vehicle that just rolled off the manufacturer’s truck is that lenders have an easier time with new auto loans, whereas a vehicle in pre-owned condition is not as easy to evaluate and appraise. They would usually rather lend on a new car loan because they can make more money on those since new cars need more cash to pay for them than do used cars and bigger loans mean bigger profits for lenders. They also trust new cars to have value that used cars may not, and if you are lending somebody money and keeping the title to the car for collateral in case they stop paying you back, the value of that car and car title becomes a really important deal.
Think about it from a car buyer’s point of view, since that is what you are and what you understand. If you are buying a brand new car you probably don’t have to worry as much about the mechanical condition of the car, its paint job, the tires, and the condition of the upholstery and interior gadgets like the radio, CD player, or GPS system. That pretty much goes without saying because you trust the dealership to sell a quality car, and even if you don’t trust the dealer or car maker you most likely have a warranty to back you up in case something goes wrong within the first few thousand miles.
But if you are in the market for a used or pre-owned car the situation changes dramatically because now you have to really study what you’re buying to make sure it works properly, hasn’t been in a flood or accident or other calamity, and that the owner before you took good care of the vehicle and didn’t run up the mileage on the odometer.
2.What Challenges Will I Face While Seeking Out a Pre-Owned Car Loan?
Keeping what we just discussed in mind, it is easy to appreciate the point of view of lenders and why they are little more skeptical regarding pre-owned versus brand spanking new car loans. So as you probably guessed, many conventional kinds of lenders – like banks that tend to be more conservative and traditional in their lending practices – are going to be hesitant to lend you much money if you are buying a vehicle that is already used and might even be well on its way to getting old.
One reason why they prefer to lend on new cars, for example, is because with a brand new vehicle it is easier to do an appraisal and set a realistic value on the car or truck – which helps a lender know how much it is really worth in the current buyer and seller market. High miles and lots of years or potential for abuse on a car translate into less value in the resale market. For any lender who has to repossess the car and sell it to the highest bidder to recoup their lost money, that becomes a major consideration.
3.How Long are Repayment Periods on Most Pre-Owned Car Loans?
Because of the types of issues covered above, most loans for used cars are not as long as the ones offered with new cars. While 36 or 48 month pre-owned loans are not uncommon, longer loans may not be readily available to you if you are buying a used vehicle. That’s simply because by the time you pay off a loan with an extended payback period the car or truck – which is the lender’s collateral in case you default on the loan – is too old to be of much value at a lender auction sale. The same goes for buying a used vehicle that is already several years old when you purchase it.
Going in search of a pre-owned vehicle loan always means that you will eventually wind up looking for reliable answers to perplexing questions about those loans and how they work. Consult the experts, read as much as you can about pre-owned loans, and take advantage of advice and resources like those found on consumer information sites on the Internet to get educated and then get a good deal on a pre-owned car loan.
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Apply the info provided in this trio of top questions and answers that people are asking about new car loans and you should be well on your way to that new car smell – and the fun thrill of the new auto ownership experience.
1.Where can I get the best deal on a new car loan?
The answer to this question will depend somewhat on your own unique financial situation, because there are a variety of lenders who make new car loans but many of them cater to a particular type of borrower. If you have excellent credit, for example, you will probably qualify for preferential rates and you can most likely walk into any bank and snag a really reasonably priced and manageable new car loan.
That’s because lenders are suffering from the mistakes they made within the past few years when they lost zillions of dollars by making bad loans and even worse Wall Street investments in high-risk mortgage backed securities and other pie in the sky ventures. If you are a responsible borrower with a great credit history, a low ratio of debt to income, and you have a steady job in this unsteady economy – then bankers want to court you and win your business.
If you have terrible credit and have recently gone through a financial crisis like a bankruptcy or foreclosure, on the other hand, those same bankers will probably turn down your loan application. You may need to go to a specialty lender who primarily does business with so-called “bad credit” consumers. You’ll pay more for your new car loan – mainly in the form of much higher interest on the loan – but when you need to borrow money and don’t look so good on paper that can be the best option.
Those who are somewhere in between can find their new car loans at banks and other lenders, but the terms and conditions of the loan will depend on your FICO score, income, credit history, and the policy of the particular lender. You can also turn to the dealership where you are buying the new car for financing, although that is generally the most expensive way to buy a new car.
2.When should I start looking for my new car loan?
Most buyers look for their new car loan at the last minute, once they’ve already picked out – and fallen head over heels in love with – their new vehicle. But unfortunately many of them get a huge jolt of disappointment when the lender breaks the news to them that they have to break off the love affair with that particular dream car and go shop for something a little less sexy, a little more boring and generic, but a lot more affordable. To avoid this kind of misstep, savvy shoppers should start to look for their new car loan as soon as possible.
Those who give themselves as much as 3-4 months will be in the most advantageous position, because that will give them enough time to review their credit report, make some changes in their finances, and prepare for a successful and swift loan approval process. Even if you don’t have that much time you can still visit lenders and find out what they expect from you, what kind of criteria you will need to meet in order to get your new car loan, and how much you can expect to borrow. That way you can shop with a realistic sales price in mind and buy a car you’ll love without having to worry about the downside if your loan does not go through.
3.What is the biggest pitfall with new car loans?
The biggest pitfall to avoid is borrowing more than you can handle, even if a lender or dealership offers it to you. Consult a financial planner, accountant, or friend who is educated about personal finance and determine how much car you can really and truly afford. Then stay within that budget so that buying your new car becomes an experience of freedom and pleasure, not stress and turmoil because suddenly all of your focus is on money problems. Debt that is reasonable can be a great asset and tool, but tip the scale too far and it can become a catastrophe. Shoot for a total auto expense – including car loan payments, insurance, gasoline, and upkeep – that does not exceed 10 percent of your total income. Try for 6-8 percent, but if you find yourself spending 10 percent or more it is a warning sign.
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You get a student loan when you are going to college or university. It is a loan taken out with the specific intent of paying for college tuition and books. Student loans can also provide enough money to pay for all or a portion of living expenses while you are in school.
You want a student loan because the interest rate is substantially lower than other loans and the payment schedule can be deferred while you are in school. A student loan can be paid back over a longer period of time. The interest does accrue while you are in school, you just don’t have to pay for the loan until you are out of school.
The federal government in the United States has a federally guaranteed student loan program. The loan is often offered as part of a complete financial aid package that could include scholarships, grants, or work study options. Because most US students qualify for some type of student aid from the government, it is important that every student start with the federal student aid and loan program.
Once you know if and what you are going to get from Federal Aid and Loans, you can then turn to private student loans.
When should I apply?
At the beginning of each year, you need to apply as soon as possible starting on January 1st to meet the Federal Student Aid deadline. You do need your prior year’s tax returns, so get them done as soon as you can and then apply. Each school has its own deadlines so if you know where you are going, contact the school for their specific information.
How do I apply for a Student Loan?
The first step is to apply for a pin number. This federal student aid pin is used to sign the Free Application for Federal Student Aid or FAFSA if you apply online. Even if you don’t apply online, the pin can be used to access and correct a processed FAFSA at a later time. Go to www.pin.ed.gov and set your pin number. If your parents’ information is going to be included on the FAFSA, you will need one of them to sign the application as well. Your parents should get their own pin number.
Applying for federal student aid and filling out the FASA is free. You should never pay someone to complete this form. Go to the FAFSA site at www.fafsa.ed.gov and follow the process. Submit the application and then wait for you Student Aid Report. This report will list your availability and approval for all student aid; including approval for government funded and partnered loans.
If you have the information you need, the form takes about two hours to complete. You can do part of it, leave it for a bit and return within a 45 day period from the time you started.
The basic information you need is your Social Security Number, driver’s license if you have one, your 2009 W-2 Forms and other records of money earned. You need your 2009 Federal Income Tax Return including IRS 1040, 1040A, 1040 EZ, Foreign Tax Return, or Tax Return for Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, the Marshall Islands, the Federal States of Micronesia, or Palau.
If you are married, you need the same tax information for your spouse, and if you are filing as a dependant student, you may need your parents´ 2009 Federal Income Tax Return. You also need your 2009 untaxed income records, Veterans non-education benefit records, child support received, worker’s compensation, and your current bank statements.
If applicable, you need your current business and investment mortgage information, business and farm records, stock, bond and other investment records. If you aren’t a US citizen you need your alien registration or permanent resident card.
Do I need my parents’ information?
You might. What you will need to do is fill out the Dependency Status Worksheet on the FAFSA website. Worksheet link: http://www.fafsa.ed.gov/before015.htm. This worksheet is specifically designed to help students figure out if they need to fill out the parental information on the FAFSA.
There are the top three questions. Don’t wait until you think you have everything, just begin and collect the information as you go.
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