Payday Advance Loans: How They Work, Costs, Pros and Cons

When you’re facing a temporary financial setback or living paycheck to paycheck, a payday advance loan may seem like an attractive solution. While these loans may temporarily solve your money problems, they can be very expensive.

Relying on these advances frequently can also turn into a habit and make your financial situation worse. Read on to learn more about how these loans work, how much they cost, and things to consider before you borrow one.

Top 5 Payday Advance Loan Providers

We reviewed 20 payday advance loans and cash advance apps based on factors like ease of application, borrowing limits, customer reviews, and costs to pick our top five recommendations.

1. EarnIn

• Borrowing Limit: $750
• Borrowing Costs: Optional tip, extra fee for instant cash

With the EarnIn cash advance app, you can borrow up to $100/day and $750/pay period. There’s no monthly fee, but users are encouraged to leave an optional tip. While you can borrow a larger amount, there may be extra charges if you want cash instantly.

2. MoneyLion

• Borrowing Limit: $500
• Borrowing Costs: $0.49 to $8.99 express delivery fee

The MoneyLion paycheck advance app allows you to borrow up to $500 without a monthly fee or interest charges. However, the express delivery fee can be quite steep per transaction if you want quick access to money. 

3. Dave

• Borrowing Limit: $500
• Borrowing Costs: Membership fee of $1/month

You can borrow up to $500 without any credit checks with the Dave cash advance app. However, you’ll need to sign up for membership to access this feature, which costs you $1/month.

4. Brigit

• Borrowing Limit: $250
• Borrowing Costs: Membership fee of $9.99 to $14.99/month

The Brigit paycheck advance app requires no credit check and will allow you to borrow up to $250. While the membership fee can be quite steep, you also get access to a Credit Builder account. This will make it easier for you to qualify for a personal loan in the future.

5. Viva Payday Loans

• Borrowing Limit: $100 to $5,000
• Borrowing Costs: 5.99% to 35.99% APR

Viva Payday Loans offers payday advances at relatively lower interest rates that are comparable to personal loans. If you’re looking for a payday advance with no credit check, this can be a good option because you can apply online and get approval within 15 minutes.

What are Payday Advance Loans?

Payday advance loans are short-term loans that can help you cover expenses like car repairs and rent. You’ll need to repay the loan when you get your next paycheck, which is usually two weeks.

Payday advance loans also refer to cash advance apps that allow you to borrow money, but at a relatively lower cost when compared to traditional payday advance loans. Some apps may also be known as wage access or earned income apps and allow you to borrow money that you’ve already earned during your pay period. 

Here are a few examples of cash advance apps:

• Albert
• Cleo
• Solo Funds
• FloatMe

How Do Payday Advance Loans Work?

Cash advances and payday loans are very similar. They’re both short-term advances that you pay back when you get your next paycheck. You can get a payday advance online or in-store, while cash advances are usually available through apps.

Loan amounts are usually small, up to $500, and lenders have less stringent eligibility requirements. For both options, you’ll usually need to have a stable income, a bank account, and a government-issued ID to qualify.

Once your loan is approved, you’ll pay it back within two weeks when you get your paycheck. In most cases, the money will be automatically debited from your account (ACH) on the due date.

Payday Advance Loan Pros and Cons

Payday advance loans, like any other financing option, come with its own pros and cons. It’s important to carefully weigh these to make sure they’re suitable for your financial situation.

Pros

• These loans can be helpful in an emergency.
• The application process is easy, quick, and hassle-free.
• You’ll be able to get the loan even with bad credit.
• Some loans, especially those you can borrow through cash advance apps, can be interest-free.

Cons

• Even when there are no interest charges, the tips and fees can add up.
• They don’t help you build credit.
• You’re at risk of overspending with easy access to money.
• You may be trapped in a debt cycle if you can’t repay them on time.

How Much Do Payday Advance Loans Cost?

Payday advance loans can be very expensive, especially if you’re not careful when comparing your options before borrowing. These loans come with an average 400% APR for a standard two-week loan.

Cash advance apps are typically interest-free, but there may be other expenses involved, such as a monthly subscription, optional tip, and instant funding fee. When compared to traditional payday advance loans, these are less expensive. However, it’s still important to be aware of the true cost of borrowing.

Here’s an example of how much you may pay to borrow $100 for 14 days with both options:

What Happens If You Don’t Pay a Payday Advance Loan Back?

Like any other type of loan, there are serious consequences of defaulting on your loan. Most payday lenders will automatically debit your account or deposit your repayment check on your due date to collect their payment.

If your payment doesn’t clear, your bank may charge you a fee, and the lender will also charge a late fee. All these fees combined can add up and make it even more difficult to repay the loan later. In some cases, the lender may send your debt to a collection agency, and they may decide to sue you in court.

Do Payday Loans Damage Credit?

Payday advance loans don’t help you build credit because on-time repayment is not reported to the credit bureaus. However, if you fail to repay the loan on time, the lender may report late payments. If you default on the loan, the lender may also report it to the credit bureaus, which can have a negative impact on your credit.

How To Compare Paycheck Advance Loans?

If you’re aware of the pros and cons of paycheck advance loans and have decided to borrow one, here are a few tips on how to compare your loan options:

• Check to see what type of fees different lenders charge. There may be financing fees, optional tips, monthly subscription fees, and express advance fees.
• Compare the total cost of borrowing between different apps and loans in terms of annual percentage rates (APR).
• Check to ensure you meet the eligibility requirements.
• Compare the funding timelines for different borrowers. In some cases you may have to pay extra to get access to the money faster.
• Research to see if there are any complaints filed about the lender in question, which may point towards predatory lending.
• Compare advance amounts to ensure you’ll be able to borrow the amount you need.

How To Get a Payday Advance Loan?

Getting a payday advance loan is generally easy and straightforward. Here are the steps you’ll need to take to apply for the loan:

1. Decide how much you need to borrow and make a repayment plan to ensure you’ll be able to pay the loan back before the due date.
2. Decide whether you want to borrow a traditional paycheck advance loan or use a cash advance app.
3. Read the fine print to ensure you’re aware of all the fees you may have to pay.
4. Compare the total cost of borrowing between different apps and loans.
5. Check to ensure you meet the eligibility requirements.
6. Read the lender’s reviews online to get a better understanding of the customer experience.
7. Gather your documents, such as your ID, Social Security number, bank statement, and pay stubs, and fill out the loan application online or in person.
8. Once you sign the loan agreement, you’ll typically get the money on the next business day.

Payday Advance Loan Alternatives

There are a number of other alternatives, like installment loans, available if a payday advance loan is not right for your financial needs. Here are a few you may want to consider:

• Personal Loans: Personal loans are a viable option when you want to borrow a larger amount with a longer repayment term. Even with a lower credit score, you may be able to borrow a personal loan for bad credit from online lenders or credit unions.
• Credit Cards: Credit cards can be useful in a pinch, and they’re less expensive than most payday loans. If you pay off the balance before the due date, you can avoid paying interest charges.
• Friends and Family Loans: This is often the best option if you don’t want to deal with high borrowing costs. We recommend drawing up a formal contract to specify repayment terms to avoid any misunderstandings later.
• Buy Now Pay Later: Buy now Pay Later or BNLP apps can help you split the cost of large purchases, often at 0% interest charges. However, they may lead to a cycle of debt if you overspend.

Make Informed Decisions About Payday Advance Loans

If you’re living paycheck to paycheck and regularly need to rely on payday advance loans, it’s important to look for a long-term financial solution. Seeking credit counseling, learning how to create a budget, and addressing the habits that led to your situation can help you create a stronger financial foundation.

If you must use a payday advance loan, be sure to compare the costs and have a repayment plan to pay it off so you don’t accumulate unnecessary fees.