I heard the Cash Train Loans ad on the TV the other day and it sparked my curiosity. I work in the finance industry, so I'm always interested to know about what products are on offer. So without any further ado, here are all your questions about Cash Train answered.
Overview
What is Cash Train?
Cash Train is a small alternative lender, or payday lender. They offer two products. Cash loans up to $2000 and personal loans up to $10 000. They are one of many lenders that offer "fast cash" or "emergency cash" loans to people with bad credit. They offer their loans as a solution to cash flow issues. They will often overlook bad credit, poor repayment history or gambling issues and approve a loan anyway. So they are mainly frequented by people who have trouble getting a loan from a bank. Does this sound too good to be true so far? It won't once we talk about their fees.
Who owns Cash Train?
Cash Train is owned by Money 3. Money 3 offer car loans up to $50 000 dollars and personal loans up to $12000. Cash Train is a subsidiary that offers smaller loans from $2000 to $10000. They both lend to bad credit clients and offer similar amounts, so you may be wondering, what is the difference?
What is the difference between Money 3 and Cash Train?
Seeing as Money 3 offers personal loans from $50 to $12000 and Cash Train offers them from $2000 to $10000, they seem like very similar services. So what is the difference? Lets compare.
There are two main differences - the amount you are able to borrow and the interest rate. With Cash Train you can borrow as little as $50. The minimum for a Money 3 loan is $2000. The second is the interest rate. Money 3 charges 19.95% whereas Cash Train charges much more, in some cases over 70%
Can you have a Cash Train loan and a Money 3 loan at the same time?
This is not clear. Depending on your circumstances you should be able to have both. But depending on your financial circumstances, Money 3 may require you to pay out your Cash Train loan before you proceed. They may also pay them directly out of the balance of your loan, a process known as consolidation.
How does Cash Train work?
Payday loans are designed to be fast. You apply online and are assessed within the same day, provided you send all the required documents. You will be asked for your bank statements, and will not be given a loan if you do not provide them. They will also conduct a credit check, but if your score is bad you may still be approved for a loan - provided you don't have any current unpaid defaults.
You can choose to repay your loan back over 3 months, 6 months or 12 months. Keep in mind that the longer it takes you to pay back, the more it will cost overall. This is because even though your repayments are lower, you are paying much more in interest.
Can I get a Cash Train loan on Centrelink?
Very few lenders will lend to people receiving Centrelink only. As with other payday lenders, Cash Train requires you to be earning at least $1200 per month from employment. As long as you earn at least that much, the fact that you receive Centrelink doesn't matter.
How long does it take to get money from Cash Train?
Unlike a bank, payday lenders get loans approved and paid fast. They do state on their website that it can take up to 72 hours from the loan approval for you to receive your cash, but generally it is within a day. The drawback of course, is that you pay for the convenience with high fees and interest rates.
Does Cash Train credit check?
All lenders will conduct a credit check before lending you money. That doesn't mean that your credit history has to be squeaky clean however. Payday lenders take the risk of lending to bad credit clients in return for the reward of higher fees and interest rates. So yes, they will check you. But no, they will not care if you have a bad credit history.
Cash Train interest rate
This is where things start to get interesting. By law, payday lenders are not allowed to charge more than 20% of the loan amount in fees, and no more than 48%pa interest. This leaves them a lot of room to make plenty of money.
So how much interest does Cash Train charge? It depends on the size of the loan. The example on their website is for a loan of $1000 over 3 months. It totals $320 fees, which equates to 70.86% interest. Over 12 months, the interest rate is 138.37%. So How do they get away with charging more than the legal 48%? To understand this you need to understand the difference between interest rate and comparison rate. Comparison rate factors in the extra fees and charges to give you an idea of the true value of the loan. That's why you may see two different interest rates advertised for the same product.
Cash Train fees
On top of the establishment fee, a loan may have other fees. Let's have a look at what Cash Train charges:
Establishment Fee: 20% or $400
Dishonour Fee: $25
Direct Debit Fee: $1.40
Whilst Cash Train claims to have no hidden fees, it was difficult to find information on default fees. This means that every time you miss a payment, $25 is added to your account balance. You will have to pay this as well as making up for the missed payment. This will make your loan longer and result in you paying even more, both in fees and extra interest.
Also, in addition to your repayment, you are also charged a direct debit fee of $1.40 per transaction. So, if your repayments are $100, they are actually $101.40. Direct Debit payments plans are not optional for these kind of loans. They require a direct debit plan as it is the best way to ensure you stay on top of your payments.
How Much does Cash Train cost?
In short - a lot. Payday loans are one of the most expensive ways to borrow money. And it gets more expensive the more you borrow and the longer the loan term. I have made this handy graph to illustrate. This information is all available on their website by the way.
You can see two things from this graph. If you borrow the same amount over a longer time, the amount you repay overall jumps considerably. Also, the larger amount you borrow the more the fees stack up. If you need a larger personal loan, I would consider paying off your current debt, building your credit rating and getting a loan with a bank or other lending institution. You never really need to borrow $10000 from a payday lender.
Missing payments with Cash Train
If you need to miss a payment, you are able to call and reschedule. As I mentioned above though, this will make your loan longer and result in you paying even more interest. Missing just one week of payments will add about $10 to you loan in interest, and even more if you are charged a dishonour fee.
Can I repay Cash Train loan early?
This is the one redeeming quality of a payday loan. They will often let you pay out your loan at any point with no penalty. Most lenders will charge a fee to pay out your loan early to make up for the missed interest they would have earned over the term of the loan.
However, payday lenders will let you pay the loan out early because they have already made enough money from the establishment fee.
How much can I borrow with Cash Train?
You can borrow from as little as $50 up to $2000 for a fast cash loan, and up to $10000 for a personal loan. The personal loans up to $10000 still have an interest rate of 48% per annum, and have a loan term of up to 24 months, meaning you will repay $14900 on a $10000 loan. That's $4900 in fees and interest. Ouch.
Is Cash Train a payday loan?
In short, yes. They offer small to medium loans in cash at high interest rates over small periods of time. The definition of a payday lender can be murky, but generally if you are borrowing cash, it's a payday loan.
The Bottom Line
Sometimes you have cash flow issues that you can't solve. Payday lenders can be tempting for this reason. They are convenient and that is why they are successful. However, taking out these kinds of loans can lead into a debt spiral. If you are already paying off a loan and another emergency comes along, it will be tempting to get another loan. And because they are easy to get approved, you can easily find yourself paying off 3 or 4 at a time. As hard as it may seem, the best approach to managing your money is a good budget. Have a look at this article for some helpful advice.
I truly believe that the key to a happy life is good money management. After all there is no stress like money stress. Happy saving.