How does a cash advance work?

Updated: February 24, 2012 at 6:53 pm PST


Cash advance loans, which are also known as payday loans and short term loans, offer borrowers opportunities to gain quick cash to pay emergency bills without putting down collateral or even going through a formal loan negotiation process.

Typically, loans are only available in small sums of money — usually ranging from $50 to $1,500. In exchange for up-fronting cash to non-differentiated borrowers, creditors charge a finance fee that’s usually in the range of 15 to 20 percent of the total monies borrowed.

The borrower presents the lender with some basic information and a check that’s postdated to the end of the term of the agreement. This date should coincide with the borrower’s payday, so that the borrower has enough money in his or her account to discharge the loan.

Shop around to find a good rate, and budget to make sure you can pay back the cash advance loans at the end of your term. While it’s possible to refinance the loan, you’ll likely have to pay a service charge every time you kick the can with respect to your debt.

Cash Advance