How A Payday Cash Advance Works

The payday cash advance is one of the oldest styles of loans in the world.  For as long as people have been getting paychecks, people have been short on their bills!  These provide a shot of cash into your bank account that can help you cover bills, emergency expenses, or put food onto your plate.

As a way to get fast cash, there aren't many things that will get you paid quicker, but they are extremely expensive and can easily put you into major debt.  I want to explain how these work so that you know what you're getting yourself into, but please consider all other options first before applying for a loan.  You will save an incredible amount of money and not have to worry about all of the problems that happen when you aren't able to cover the loan's repayment.

There are a couple of ways to apply for a loan. If you live in a large city you probably have payday loan lenders that are close to you. Most check cashing stores also offer this style of loan, so you can apply right there and get a check in about an hour.

If you don't live near any lenders, online is the way to go. The application process is extremely simple, but it's important to read through the fine print first to make sure that the company works in your state. Not all lenders are licensed to operate in every state.

The application, speed, rates, and terms are fairly similar between online and local lenders. There isn't a clear advantage between the two, so choose the one that is the most convenient for you.

Most local lenders will cut you a check, but some will deposit the money right into your checking account.  Online lenders are always going to do direct deposit, as well as direct withdrawal (more on that later).

I said above that these loans are expensive, but how much do they really cost?  On average, you're going to pay $25 for each $100 that you borrow.  Some states have limits on the maximum that lenders are allowed to charge, which are usually lower than that average.  If you do the math, a loan of $500 will cost you $625.  Imagine your finances after your next paycheck and see what it will be like if your check was $625 less.  It's pretty steep!

The method that you pay your loan back depends on how borrowed the money initially.

In the case that your lender wrote you a check, you would have written them a postdated check for the day the loan is due at the same time.  They'll then cash your check, whether or not you have enough to cover it, and you'll be done with your loan.

If you had the money automatically deposited into your account, it will be automatically withdrawn at the time your loan is due.  Usually nothing has to be done on your part, except for having enough to cover the loan.

Normally, no, they are not a good decision.  However, it may be the only way to get the money that you need that fast.  Don't borrow money if you aren't sure if you're going to be able to repay it and still have enough money to feed yourself or you will end up in extreme debt and have the lender's collection department breathing down your neck every day!