Mortgage Cash Advance

When dealing with foreclosure, some homeowners turn to cash advances as a last resort to keep from having to vacate their homes. For emergencies like this requiring quick access to money, cash advance programs, also known as payday loans or “quick cash”, provide small, short-term loans that are usually less than $1,500. The catch is that they charge a fee, a rate normally between 10 to 15 percent for 14 days, which can top out to a 700 percent rate of interest annually, if the loan is rolled-over. Rates used to be much higher until the government passed legislation in 2007 that capped interest rates for military personnel at 36 percent, but they are still among the highest.

Most lenders require that applicants be at least 18 years old and a legal U.S. citizen. Lenders also need to see proof of an active bank account in addition to a minimum monthly income of $1,000 per month.

A personal check secures the cash advance, acting as collateral, although some companies might require credit card or bank account information in addition to the check. Once the amount is agreed upon, the money, minus any fees, is disbursed to the borrower. Some fees that can be stipulated in the fine print on the contract include an early repayment fee, a late repayment fee, membership fees, and bounced check fees.

The application and review process can take very little time, with some websites promising that a loan can be disbursed within one hour.

The lender will then hold the check until the following pay day. When 14 days have passed, the lender either cashes the check, debits the amount from the borrower’s account electronically, or the borrower must come to settle the amount owed. If the borrower doesn’t have the funds, they can choose to extend the loan and pay an additional finance charge. However, this practice can snowball quickly and lead to the borrower owing much more than their principal amount. It can be especially difficult if the borrower uses the cash advance to stave of home foreclosure every month.

While cash advances are sometimes the only recourse available to desperate homeowners, one should only borrow as much as they can realistically afford to pay back. Likewise, there are several alternatives to cash advances, such as small loans from local credit unions and credit cards with a low annual percentage rate. It might even be worth it to call the creditor or loan servicer to see if a reasonable payment plan can be worked out or if an extension can be given.