Cash advance vs payday loan: the real difference
Both put cash in your account fast. The difference is how you pay it back, and that changes the cost by hundreds of dollars.
A payday loan is usually due in one lump sum in about two weeks, with a fee that often equals almost 400% APR. An installment cash advance through GridMoney is repaid in monthly payments over 3 to 24 months at 5.99% to 35.99% APR, so each payment lowers your balance.
Side by side
| Payday loan | Installment cash advance | |
|---|---|---|
| Typical amount | $100 to $1,000 | $200 to $5,000 |
| Repayment | One payment in ~2 weeks | Monthly over 3 to 24 months |
| Typical cost | $10–$30 per $100 borrowed | 5.99% to 35.99% APR |
| If you can't pay | Renew for another fee | Call lender about a plan |
| Balance over time | Stays the same when renewed | Falls with every payment |
The real cost of $500
Borrowing $500 for three months
Each square is one month
Total cost of borrowing $500 for three months
Interest and fees only
The renewal trap
When a payday loan comes due and you can't cover the full amount, many lenders let you pay just the fee and roll the loan over. You pay another fee two weeks later, and the amount you owe hasn't moved. CFPB research found most payday loans are rolled over or followed by another loan within two weeks.
If you already have a payday loan, ask whether your state requires the lender to offer an extended payment plan at no extra cost.
Which should you choose?
- Need a few hundred dollars for a few days and a free option exists, like an employer advance or a biller payment plan? Start there.
- Need $200 to $5,000 and a few months to repay? An installment cash advance usually costs far less than renewing a payday loan.
- Credit union member? Ask about a payday alternative loan capped at 28% APR.
Already have a payday loan?
- Ask about an extended payment plan. Several states require payday lenders to offer one at no extra cost.
- Avoid renewing if you can. Each rollover adds a full fee and the balance doesn't shrink.
- Talk to a nonprofit credit counselor. Look for an NFCC member agency.
- Replace it only if the math works. A lower-cost installment loan helps only if the monthly payment fits your budget.
- Check your state's rules. Your state financial regulator lists payday limits and complaint options.
Common questions
Is a cash advance the same as a payday loan?
Not through GridMoney. Lenders in our network offer cash advances repaid in monthly installments over 3 to 24 months. A payday loan is usually due in one lump sum about two weeks later.
Why are payday loans so expensive?
They charge a flat fee for a very short term. The CFPB notes a typical $15 fee per $100 for two weeks equals an APR of almost 400%, and renewing adds another fee without reducing the balance.
Are payday loans legal everywhere?
No. Some states ban them or cap rates so low that payday lenders don't operate there; others allow them with limits on fees or renewals.
Can I use an installment cash advance to pay off a payday loan?
Some people do, but only if the new monthly payment fits your budget. Ask your payday lender about an extended payment plan first; some states require one.
Skip the lump sum
Repay $200 to $5,000 month by month, with every cost shown before you sign.