Are Cash Advance Loans Addictive

I think the term “addictive” in relation to this topic is rather exaggerated as it implies something you cannot stop doing once you have begun like gambling or smoking. This is more of a “You get stuck in a rut” rather than you can’t help but go and get further in debt every month. Cash advances have not been operating long over in the United Kingdom however they have become popular within larger cities and towns.

I worked for a cheque cashing company called “The Money Shop” of which in underwritten buy an American company and whilst I was there I did learn a great deal about this business. You often get a lot of people that disagree with the “high APR” that is charged when people agree to these “short term loans” or “cash advances” and they would be right as it was 200% APR when I worked for that company. Now this is enough to really slap you in the face and bring you back to reality but it isn’t actually as much as it seems. The term of the loan actually never exceeds 3 months and in most cases only has a term for 30 days. APR is worked out in relation to the repayment scheme that the product offers so really its just over what you would normally pay on a months worth of interest on a regular credit card.

Thing is there is a catch which has been deemed as an “addiction” by some, however I would actually consider it more of case of bad planning and no thought of what will happen next month. Here are just some simple facts: You borrow 300 till payday to help pay your car tax for example. Now next payday comes and you have to pay out 300 plus anywhere from 16% to 25% on top of that repayment. Now logic would tell me that unless I can afford to be (for argument sake) 350 short on my next payday, this type of loan scheme would not be suitable for me. Yet thousands of people do this each month and then once they have extended the payments as far as they will go suddenly think “now I’m in an even worse situation than I was before.”

So the moral of the story is: these cash advance schemes can get you into a never ending cycle of debt if you don’t plan your finances for the following month properly but they could also be a saving grace if you are organised. Besides anyone that doesn’t think before taking out a loan of any kind needs to seriously rethink their future financial plans as in this day and age there is no longer room for mistakes.

So no, they are not a scam but they do however tend to pray on the ill-informed public hence why you will see these “shops” in more run down and poor areas than in built up lucrative ones. This however is just a clever business tactic and whilst working for one of them I suddenly realised that this type of business will be very short lived as it is highly unsecured for the business and tends to result in nearly a 30% loss rate which will soon climb.

As a debt collector for a different company I was taught a saying, “if someone has got themselves into debt by ignorance, don’t expect them not to do it again.” Basically this is saying once people get into debt they rarely find a way out, more often then not they end up further in debt.

So are cash advances addictive? I would have to say no. But they are a very bad idea in the first place unless you’re well aware of all the facts.