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A cash advance payday loan is a particular type of loan that could be best described as a loan of convenience. Other kinds of loans like installment loans let you borrow a chunk of cash and then pay it back gradually in exchange for a fee – usually in the form of regular interest payments. Then there are revolving lines of credit such as credit cards that let you borrow or charge a certain amount – up to a limit – and once you pay it off your credit limit goes back up again so you can borrow or charge some more. But a payday loan has one benefit to the borrower that is unique and different from those other types of traditional loans. What the payday loan does – as its name implies – is it gives access to your paycheck or payday funds before you actually get paid.

You walk into a payday loan establishment in other words, and borrow money. In exchange for getting the cash in your hand you agree to repay the loan – plus whatever fees, charges, or interest that the payday lender adds on top of that amount – as soon as your actual payday arrives and you get your check from your employer. Payday loans are really about as simple as that.

But just because the concept is simple and straightforward, that does not mean that borrowing with a payday cash advance style loan is always so simple. The fact is that these loans – which are one of the most popular types of short-term loans now available across the USA – are also one of the most controversial kinds of loans.

While many people passionately support them and emphasize their importance – especially for working class people who do not have much savings or other sources of income to fall back on between paychecks – there are just as many consumer advocates who complain that cash advance payday loans are a rip-off for the consumer. That’s because many cash advance loans charge an extraordinarily high rate of interest. It is not uncommon to borrow $100 for just a few days or weeks and pay a fee of $15-$18, for example, and experts point out that that works out to a much steeper rate of interest than most people are used to paying.

For a two-week loan of $100 that comes with a price tag of $15 in interest charges, for instance, the annual percentage rate or APR is a whopping 390 percent. Normally credit card companies and banks charge more like 5-10 percent for their APR, and the ones that are really expensive rarely hit their customers with an APR that exceeds 30 percent. So using a cash advance payday loan can, in fact, cost more than 10 times what the highest rate on a typically credit card costs – and up to 40 or 50 times as much as more competitively priced bank or credit card loans.

So now you are probably wondering why anyone would use a cash advance payday loan, and why they are still so popular despite the added costs. The reason is that there are millions of people who do not have access to those more reasonably priced ways of getting fast access to needed cash, and for them the payday loan concept can mean the difference between having money to pay a bill and missing a payment. If you miss a payment, then you get socked with enormous penalties. Bounce a check at a bank, for instance, for $100 and you might end up paying $35 in bounced check charges – which is about twice as much as you would have to pay to get a $100 payday cash advance loan to cover that check so it won’t turn to rubber and bounce. Then there are the dings on your credit history for missing a payment, making a late payment, or writing a bad check.

Plus don’t forget that in many places the penalty for writing bad checks is not just a stiff cash fine but jail time. The courtrooms and jails are filled with people who wound up there just because they wrote bad checks – and many of them did so not on purpose or because they are crooks, but because they just did not have the money to tide them over until payday.
So cash advance payday loans are unique and they inspire lots of heated debate. If they work for you because of your particular circumstances, then take full advantage of them for your own benefit. On the other hand if they do not suit you because you have other ways to handle your finances and do not need to pay super high rates for the privilege of getting your hands on a short-term loan, then skip them and borrow in a more affordable manner.

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