When Does a Payday Loan or Cash Advance Have to Be Paid Back?

Payday loans, also known as cash advances and post-dated check loans, allow consumers to borrow money until their next paycheck arrives. The short-term borrowing can help someone pay for an unexpected expense, but it also has some risks because it needs to be repaid so soon.

Time Frame

The payday loan must be paid back in full by the borrower's next payday. This is generally anywhere from a few days to one month after the date of the loan. The exact date depends on when the borrower will receive his next paycheck. On average, the payday loan repayment date is set for about two weeks after the loan is taken out, according to MSN Money.

Rolling Over

In most cases, a borrower can roll over a payday loan if he cannot afford to repay it in full. When a borrower rolls over the loan, he pays the fees again to extend the borrowing period until the next payday, which is usually another two weeks. Rolling over payday loans is very common because borrowers can rarely afford to give up so much of their next paycheck. According to MSN Money, the average borrower rolls over a loan nine times, for a total time of 18 weeks.

Costs

A payday loan typically costs $15 per $100 borrowed, as of 2011, according to MSN Money. According to the Federal Reserve, this is equivalent to an annual interest rate of 391 percent. The exact cost varies depending on what state the borrower lives in and what company the borrower uses. Each state generally sets its own cap on how much payday lenders can charge, and some states do not allow payday loans at all.

Payday Loan vs. Credit Card

Although payday loan companies market their product as a low-cost alternative to borrowing on a credit card, this is only because of differences in the repayment term. The average payday loan costs $15 per $100 for two weeks. Borrowing on a credit card, on the other hand, is significantly less expensive than a payday loan with the same repayment term. For example, say someone borrows $100 on a credit card with a 30 percent annual interest rate, which is very high for a credit card. The interest charge on that balance at the end of the first month is only $2.50. Even if the borrower takes six months to pay off the money borrowed on the credit card, it still costs less than the average two-week payday loan.