Legal Definitions - advance

An advance is a type of loan or payment where money or goods are given before receiving something in return. The person receiving the advance is expected to repay it later or adjust the basis of the transaction. There are two types of advance payments:

• As security for the delivery of goods or services
• As an early payment of a bill or debt

For example, when you rent an apartment, you may be required to pay a security deposit in advance. This is to cover any damages you may cause to the apartment during your stay. Another example is when you buy a prepaid cell phone plan. You pay in advance for a certain amount of minutes or data to use on your phone.

Advance payments are also used to protect sellers from buyers who may not pay for goods or services. For instance, a seller may ask for an advance payment to cover the cost of producing a product. This way, if the buyer doesn't pay, the seller won't lose money. Companies may also be required to make advance payments for large orders to provide sufficient consideration for the producer.

When an advance payment is accepted before a due date, the debt or bill that is due is adjusted by the payment to reflect a lower balance. For example, if you owe $100 on a bill and you make an advance payment of $50, the amount you owe is reduced to $50.