Cash Advance Loan vs. Payday Loan: Which Costs Less?
"Cash advance" and "payday loan" are often used as if they mean the same thing. They don't. Choosing the wrong one can cost you hundreds of dollars on a loan of just a few hundred.
Quick comparison
| Feature | Cash advance loan (installment) | Payday loan | Credit card cash advance |
|---|---|---|---|
| Repayment | Fixed monthly payments | Full amount on your next payday | Revolving minimum payments |
| Typical APR | Up to 35.99% at Fast Loan Advance | Often around 400% | Card's cash APR, often 25% to 30% |
| Term | 3 to 24 months | About 2 to 4 weeks | No set end date |
| Fees | Possible origination fee | About $10 to $30 per $100 | Cash advance fee, often 3% to 5%, plus ATM fees |
| Builds credit | Often, with on-time payments | Rarely reported | Yes, but raises utilization |
What is a cash advance loan?
A cash advance loan is a small installment loan. You receive the full amount upfront and repay it in equal monthly payments over at least 91 days. At Fast Loan Advance, cash advance loans run from $200 to $2,500 with terms of 3 to 24 months.
What is a payday loan?
A payday loan is a short-term loan, usually $500 or less, that you repay in one lump sum on your next payday, typically two to four weeks later. Instead of interest, the lender charges a fee per $100 borrowed. According to the Consumer Financial Protection Bureau, a common fee of $15 per $100 for two weeks equals an APR of almost 400%.
A real cost example: borrowing $500
Payday loan
Borrow $500 with a $75 fee, due in two weeks. If you can't repay the full $575, many borrowers roll the loan over and pay another $75 fee. After four rollovers, about two months, you've paid $300 in fees and still owe the original $500.
Cash advance loan
Borrow $500 at 35.99% APR over 6 months. Your payment is about $92 a month, and total interest is roughly $52. There's no balloon payment, and the loan is paid off on a set date.
Why the repayment structure matters most
The biggest danger with payday loans isn't just the fee. It's the lump-sum repayment. When your whole paycheck is needed for rent and bills, repaying $575 at once is hard, so many people borrow again. The CFPB has found that most payday loan fees come from borrowers caught in long sequences of repeat loans. Spreading repayment over several months breaks that cycle.
When a credit card cash advance makes sense
If you already have a credit card and need a small amount for a very short time, a card cash advance avoids a new application. But interest usually starts the day you withdraw, there's no grace period, and the fee applies immediately. For more than a few hundred dollars or more than a month or two, an installment loan is usually more predictable.
How each option affects your credit
Installment loans are often reported to the credit bureaus, so a record of on-time monthly payments can help rebuild your credit history over time. Payday loans are rarely reported when paid on time, but an unpaid payday loan sent to collections can hurt your score. A credit card cash advance raises your credit utilization, which can lower your score until the balance is paid down.
Questions to ask before you borrow
- What is the APR, and what is the total amount I will repay?
- Is there an origination fee, and is it added to the loan or deducted from my funds?
- Can I pay the loan off early without a penalty?
- What happens if a payment is late?
- Will on-time payments be reported to the credit bureaus?
At Fast Loan Advance, every one of these answers is in your loan agreement before you sign, and there's never a prepayment penalty.
Which one should you choose?
- Choose a cash advance loan if you need $200 to $2,500, want fixed payments, and need more than one paycheck to repay.
- Avoid payday loans unless you are certain you can repay the full amount on your next payday without borrowing again.
- Consider a card cash advance only for small amounts you can repay within weeks.
Frequently asked questions
Is a cash advance loan the same as a payday loan?
No. A cash advance loan is repaid in fixed monthly installments over months, with APRs up to 35.99% at Fast Loan Advance. A payday loan is due in full on your next payday and often has an APR near 400%.
Which is cheaper, a cash advance or a payday loan?
An installment cash advance loan is almost always cheaper, especially if a payday loan would need to be rolled over. On a $500 loan, rollover fees can exceed the amount borrowed within a few months.
Can I get a cash advance loan with bad credit?
Yes. Fast Loan Advance considers all credit types and looks at income and banking history as well as your score. Lower scores usually receive higher APRs.