A cash advance loan is a type of loan designed to give a borrower fast access to money he wouldn’t ordinarily have until a later date. Usually, cash advance loans are lent with the understanding that the borrower will repay them upon receiving money they are scheduled to obtain, such as money from a paycheck or social security disbursement.
Unlike other types of loans, a cash advance loan is meant to be repaid in a short period of time rather than months or even years after the borrower receives the funds. Since they are typically due when the borrower receives his next paycheck, some of these loans may be due in as little as a week after funding. For example, if a person is paid every two weeks, his loan is typically due within about two weeks of disbursement.
Many cash advance loans don’t require repayment in full at the end of the loan term. Instead, a borrower is often allowed to extend his loan, getting a new due date that corresponds with his very next pay check. For example, if the original due date was 3 March and the person is paid every other Friday, he may request to have his loan extended beyond 3 March to 17 March. He wouldn’t be able to wait until the 17th to pay any money, however. In most situations, he would have to pay a finance charge on 3 March for the privilege of extending his loan.
Some people may view cash advance loans as lifesavers because of the fact that they make it possible to obtain cash in as little as 24 hours time. Typically, they don’t require a credit check which means that almost anyone can obtain one. All a person needs is a verifiable source of steady income, such as a job or social security and proof of identity. Sometimes a checking account is required as well, as many cash advance lenders require borrowers to sign something allowing them to withdraw repayment money and finance charges from their bank accounts automatically.
Though some people see cash advance loans as beneficial, they can actually make a person’s financial troubles worse. Often, the finance charges are astronomically high. For example, a person may pay $240 US Dollars (USD) in finance charges every two weeks for the privilege of borrowing $800 USD. If the person takes eight weeks to repay the loan, he will pay $960 USD in finance charges alone. If he is short on funds in the first place, such high charges can be financially crippling.