What is a Payroll Cash Advance?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 03 February 2020
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Also known as a payday loan, a payroll cash advance is a short-term loan that the customer must repay out of the next scheduled paycheck. In order to comply with the terms and conditions of the loan, the debtor normally provides the lender with a post-dated check that can be deposited at the proper time. Along with this traditional method, the customer can sometimes elect to share banking information that will allow the lender to withdraw funds directly from a checking account shortly after the next anticipated payday. Payday loans are normally considered to be a means of obtaining funds in an emergency situation without going through the more formal process of applying for a loan from a local bank.

There are a couple of advantages to a payroll cash advance. First, the process of obtaining the advance is normally much quicker than going through the procedure for securing a standard loan. There is no need to pledge collateral and in most cases there is no credit check. A debtor simply presents the most recent payroll check stub to verify income, along with documents that confirm the identity and address of the individual borrowing the funds. Often, the entire process can be completed in less than a half-hour. Most payroll cash advances are funded at the agency site with cash.


However, there are drawbacks to the payroll cash advance. The interest rate applied to these short-term loans are normally much higher than the rates applied to a standard loan. In addition, there is often a transaction fee or other fees that add to the total amount that must be repaid. The terms and conditions associated with the payroll cash advance normally allow the lender to take immediate legal action if the bank does not honor the check provided by the debtor or will not process the electronic withdrawal for any reason. This means that the debtor does not usually have the option to identify the origin of the problem and correct it, as would be the case with many traditional lenders.

Before choosing to utilize a payroll cash advance service, consumers should make sure a given agency is operating within the limits set by governmental agencies with jurisdiction. It is also imperative to read and understand the terms and conditions before signing for the loan. This includes understanding exactly how much will be required to repay the balance of the loan plus interest and transaction fees, and what type of recourse both parties have in the event there are any type of unforeseen circumstances.



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