Concerned that taking out a cash advance is more hassle than it’s worth? Just because you’re asking for something from an organisation, doesn’t mean you shouldn’t get good customer service. After all, there are thousands of organisations out there all willing to lend you cash.
As most of us know, the reason for taking out a cash advance is to pay for something that you can’t afford at that particular time. The way a cash advance works is that you pay an agreed monthly amount back to the lender for a set period, until the cash advance is paid off in full.
Despite what some individuals may think, there is such a thing as a 'no hassle' cash advance. Our practical advice will help you avoid some of the common pitfalls and make you realise just how easy the process of applying for a cash advance should be:
What types of cash advance are available?
The two types are secured and unsecured. Secured is where you borrow on the value of your house. These cash advances tend to be more cost-effective, as the rates are normally lower than unsecured, because there's less risk to the lender.
How do I ensure value for cash?
• Firstly decide how much you’d like to borrow and ideally over what time period you’d like to pay it back. That way you can shop around for the best cash advance quotes.
• Always read the small print. Some cash advances incur charges, such as set up fees or imply you should take out their insurance, which can be expensive.
• Taking out a secured cash advance (rather than unsecured) will usually offer much better rates of interest, as the risk is not as great for the lender.
Do I have to take out insurance?
No – you don’t. However, many lenders may suggest it to you, as it offers protection in certain circumstances (such as illness) if you couldn’t cover your re-payments. Also, you don’t have to use the insurance offered by your lender, as you may find a cheaper option elsewhere.
If you do decide to take out insurance, remember that it will increase your monthly payments, so you’ll need to factor that in to your budget.
What is an APR?
• APR represents the interest you will pay on your cash advance. It is the Annual Percentage Rate of charge.
• APRs vary dramatically from lender to lender and the one you will be offered could be higher than any advertised, depending on your personal circumstances.
• Clearly the lower the APR, the less interest you will pay on your cash advance. However, be aware that some lenders advertise a monthly APR on their cash advance quotes, which when calculated on a yearly basis becomes a lot more expensive.
• Before you sign a cash advance agreement, your lender is obliged to tell you what APR you will be paying.
What are the pitfalls when applying for a cash advance?
• Always make sure you understand your cash advance agreement, as once you have signed it, you are legally bound by its terms.
• When looking for interest rates (or APRs) find out if the cash advance will be on a fixed or variable rate. Fixed means the amount you pay will remain the same for the length of the cash advance, but variable means that it could change – which means it’s more likely to go up – and this could affect your budgeting.
• Find out abut other conditions attached to the cash advance and be sure that they suit your requirements. For example, you may be able to take a break from paying for a month or so, or you may want to pay off the cash advance early. Check that you do not have pay a penalty for such options.
Do I have any legal protection when taking out a cash advance?
Yes – to a certain extent, as all personal cash advances are protected by the Consumer Credit Act 1974. However, as already stated, once you have signed a cash advance agreement, you are expected to fulfil your agreement.
The Act contains regulates how cash is lent and cover you for an unsecured cash advance up to £25,000. If you use a reputable broker it is highly unlikely that you will need to complain about your lender.
Never bury your head in the sand if you get into difficulty. Reputable lenders practice good customer service, but remember the onus is on you to keep to your cash advance agreement. If you ever find yourself not able to meet the repayments, contact your lender immediately. They should be able to help you, by re-visiting your repayments. However, there may be a charge for this.
Who should I borrow from?
With so much choice on the market these days, it’s always advisable to use a broker, who can shop around to find the most competitive tailor-made deal for you.