A payday cash advance loan or payday loan is a short term loan usually up to $500 a person can get and pay back in a short time period. They are usually given out with the understanding that the borrower will pay them back with their next paycheck or any form of payment the borrower is scheduled to receive. A paycheck advance loan will allow someone to have access to money they would not normally have until a later date.
A cash advance is just another term used to describe a pay day loan. However, it may also be used to refer to the act of drawing cash from an ATM with a credit card. Nonetheless, cash advance is still commonly used as a synonym for pay day loan or paycheck advance loan because the concept is very similar. There is often a fee for a credit card cash advance as well, but an actual paycheck loan incurs a lower interest rate than that of a cash advance on a credit card.
The difference between other loans is that a pay day loan is on a very short term of one to two weeks. This is because they are meant to be paid off at the borrower’s next paycheck which generally comes every one or two weeks.
Not all lenders require payment in full at the end of the loan term. Several will allow the borrower to extend their loan further to their next paycheck. But in order to extend the loan term the borrower must be able to at least pay a finance charge or any extra interest.
Payday loans are easy to obtain because they do not require a credit check. In this regard they are very convenient especially since money can be obtained within 24 hours. All that is required is a verifiable source of income such as a pay stub and source of identification. A checkings account may also be required and in most cases a lender will ask for a postdated check of the date the loan is due.
Just like any other loan there is a small amount of risk involved and the borrower be financially responsible in order to limit their expenses. Payday loans have been known to cause debt or financial troubles, but many states have placed limits on paycheck advance loans in order to prevent such troubles. This is done by limiting the annual percentage rate (APR) that payday lenders can charge. Maximum loan amount, loan term, and finance charges can also vary between states. For instance, Colorado has a maximum loan amount of $500 while Wyoming has no limit.
When taking out a paycheck advance loan it is advised to take only as much as you need and consider how much of your next paycheck you will need as well. (E.g., food, transportation, other needs). Asking for a safe amount and being sure you will be able to pay the amount off with your next paycheck will prevent any financial troubles.