Cash Advances

• Cash advances or payday loans are a type of short-term lending that involves borrowing against future earnings. With a cash advance, a lender gives you a certain amount of cash and then you pay it back, typically a few weeks later, with interest. To qualify for a cash advance, you typically have to have a job and regular income. Qualifying for this type of loan usually does not require you to have a solid credit history to qualify. You could also receive a cash advance by borrowing money from your credit card.
  
  

High Interest Rates

• One of the major issues of using a cash advance is that it comes with a very high interest rate. When compared to other types of lending, the interest rate of a cash advance is significantly higher. With a cash advance, it may not seem like you are paying that much, because it is for such a short term. In reality, the annual percentage rate of the debt could be higher than 400 percent. Since these loans are usually for relatively small sums of money, it may not seem like you are paying as much as you are.
  
  

Borrow More Than You Can Pay

• Another problem with cash advances is that you can borrow more than you can realistically afford to pay back. This is especially true when you use a credit card to get a cash advance. With a credit card, you can usually take it to an ATM and get cash out. In some cases, you can get thousands of dollars in cash from a credit card. When you do not have the money to pay it back, you could face severe penalties and credit damage.
  
  

Collection Actions

• If you cannot afford to repay the cash advance, the cash advance lender may come after you with several collection actions. The company may start out by calling you and trying to collect the balance. If that does not work, the lender may file a lawsuit against you to collect. After the lender wins the lawsuit, you could have your wages garnished or have a lien placed on your property under order of the court.