I am not ashamed to admit that in one point of our lives (well, several points… but they were all clustered within a six month period!), Dan and I resorted to using a cash advance loan to squeeze through a really tight financial bind. I say resorted because I don’t see cash advance loans as an immediate answer. I see them as a last resort, after all other options are exhausted.
You see, a cash advance loan is a short-term loan that requires the borrower to pay it back in full on their next payday, along with interest. The interest usually works out to be 20% per every $100 borrowed. So if you borrow $100, you pay back $20, if you borrow $300, you pay back $60, and so on and so forth. In the event that the borrower cannot pay back the cash advance loan (also referred to as a payday loan) on that specified date, they must pay the total interest due as an extension. But when the extended payment date comes up again, they must pay that interest again. So if you borrow $200, and can’t pay it back on the due date, you’ll be required to pay $40 (20% interest) for extending the loan, and then the $40 again when you pay back the full balance of $200.
With payday loans, you can quickly get sucked into a vicious cycle of using other loans to pay off the original one. For this reason, I highly recommend that you reserve taking out a payday loan for those dire emergencies and urgent financial matters that just can’t wait, and you can’t get funds from any other source.
