Debt Traps Can Quickly Spiral Out of ControlTake care not to be trapped into the cycle of piling cash advance upon cash advance because you cannot repay the first loan when it is due. When you start taking a new cash advance to pay off the first one, it is easy to create a huge debt that can quickly spiral out of control. Before taking out a cash advance, you should always have a plan in place to pay it back in a timely manner.
If you find yourself unable to pay the cash advance back when it is due, talk to the lender right away. Most cash advance lenders will allow you to make a payment arrangement that enables you to pay the cash advance back in monthly installments. In fact, some states require the lender to make this option available including Washington, Alaska, Florida, Alabama, Michigan, Oklahoma, Illinois, and Nevada. Especially in the states listed, if you find your lender unwilling to allow monthly installments, you can contact a state regulator for assistance.
Do not feel forced to agree to allowing lenders to take their payments directly out of your paycheck. Although the Federal Trade Commission's Credit Practices Rule does not allow for mandatory wage assignments, some unscrupulous lenders will sneak it into the fine print of your cash advance contract. Read your contract carefully to see if you signed a clause allowing this. If you did, you need to immediately write to your lender revoking that portion of the agreement. That way, should you default, the lender will have to take you to court before attaching your wages.
A cash advance is typically secured by use of a personal check, which can potentially add a considerable cost to the original loan amount by way of bounced check fees. When the lender tries to cash the check, but there are non-sufficient funds in your account, you will get extra charges from both the lender and the bank. Banks typically charge from $20 to $35 for each check that bounces, and the lender will add a similar charge to your balance owed.
Unfortunately, your losses are not limited to a one-time fee, either. Regulations allow for a check to be presented three times, so once your paper check is returned once, the lender will usually convert it to an electronic check which can be presented again to the bank for payment. This can mean triple charges from the bank and then triple charges from the lender, as well.
Even a cash advance that was not secured with a paper check, but by an agreed electronic debit, can incur a bounced check fee. An electronic funds transfer (EFT) is treated just like a paper check with all the associated rules and fees attached. The EFT can be presented three times just as a paper check can, and you will still get charged each time should your check be unable to clear due to non-sufficient funds. Most cash advance terms will require you to keep your bank account open until the cash advance is completely repaid, including any extra charges and fees, so closing your account will most often not be an option.