Yes, you are usually permitted to pay off your payday loan earlier than you originally agreed with the lender. There may however be conditions involved with paying off your loan early, such as being charged an additional fee.
In order to pay off a payday loan early, you need to contact your lender to arrange an early collection. This will not always reduce the interest rates or fees you agreed to pay to the lender upon taking out the loan. With this in mind, Dollar Hand discusses the ins and outs of repaying back a payday loan early.
What Is a Payday Loan?
A payday loan is a high risk and short term loan which is designed to be used to cover any emergency loans that you have not budgeted for. Payday loans tend to be for between $100 and $1000 although some lenders are prepared to offer more funding.
As payday loans are only designed to last until the upcoming payday, the agreement involves repaying the loan in full in between two and four weeks of taking out the loan. This means that the loan with the fee for borrowing it should be returned to the lender within a month.
It is always important to check the impact a payday loan can have on your credit score in advance of taking one out. Payday loans are short-term loans designed to be repaid on your next payday, but if you are able to pay off the loan before the due date, it’s generally beneficial as it can save you money on interest and fees.
Always check your agreement with the lender before repaying your loan off in advance.
What is an Early Repayment?
An early repayment is when a borrower decides they are able to pay their loan off earlier than they had originally planned to with the lender. This can include paying off part of a loan or making an entire repayment.
Lenders do usually permit borrowers to make early repayments on loans, but it is always important to check the details of your agreement in advance.
Can I Pay My Payday Loan Off Early?
You can always pay a payday loan off earlier than you originally agreed with the lender. Most lenders will not charge you a fee for trying to repay off any money borrowed earlier than they originally anticipated. In spite of this, all lenders do operate with different policies and so it is always important to check if you will be charged for repaying your loan at a different date.
Alternatively, some lenders offer reduced interest if your loan is paid off earlier than was originally agreed, meaning that you will end up paying the lender less money than if you were to repay your loan on your actual payday.
Paying a payday loan off early is not what a payday loan is designed for, as it is supposed to last you as a source of emergency funding until you receive your upcoming monthly income. Even if you feel you are able to pay off your payday loan in advance, the interest rate and fees may still be the same if you wait until your official payday to do so.
How Do I Repay My Payday Loan Early?
You can repay your payday loan earlier than you planned to by contacting your lender and arranging a direct debit. This should not be difficult as your lender will normally collect the full amount of your payday loan alongside any interest or fees calculated in one payment on your arranged payday. The lender should then provide you with a settlement quote which should highlight any differences in payments which you were not originally aware of.
5 Steps To Repay A Payday Loan Early
1) Check the Terms
Before attempting to repay your payday loan early, review the terms and conditions of the loan. Some payday lenders might have prepayment penalties or fees associated with early repayment. It is important to understand these terms to make an informed decision.
2) Contact the Lender
If you are considering repaying the loan early, it is a good idea to contact the payday lender directly. Ask about their policy regarding early repayment and any potential fees. They can provide you with specific instructions on how to proceed.
3) Calculate Savings
Calculate how much you will save by repaying the loan early. Payday loans often have high interest rates and fees, so paying it off early can significantly reduce the overall cost of the loan.
4) Payment Method
Determine how you will make the early payment. Most payday lenders accept various payment methods, including online payments, in-person payments or electronic fund transfers.
5) Verify Account Details
Ensure that you have the correct account details and payment instructions from the lender to avoid any payment processing issues.
What Are The Benefits of Repaying A Payday Loan Early?
A key benefit of repaying back a payday loan early is the cost savings. Payday loans often come with high annual percentage rates (APRs) and fees. Repaying the loan early can help you avoid these additional costs.
Paying off the loan early eliminates the debt from your financial obligations sooner, providing you with relief from the burden of ongoing loan payments. As well as this, paying off your payday loan early can have a positive impact on your credit score, as it shows responsible financial behavior.
What Should I Consider Before Repaying A Payday Loan Early?
Before repaying back a payday loan early, you should find out if there are any prepayment penalties as some payday lenders might charge fees. Make sure that you understand these potential charges before proceeding.
Before using funds to repay the payday loan early, assess your overall financial situation. Ensure that repaying the loan early will not negatively impact your ability to cover essential expenses.
Final Thoughts
Repaying your payday loan early can be a financially savvy move, provided you understand the terms, potential fees and the impact on your overall financial situation. Contact the lender, clarify the details and make an informed decision based on your circumstances. If there are no prepayment penalties, repaying your payday loan early can save you money and help you regain control of your finances sooner.
If you decide to go ahead, keep records of your communication with the lender and the early payment confirmation. This documentation can be useful in case of any disputes or discrepancies in the future.
Justine is a full-time writer with lots of expertise and a wealth of experience in the financial world. In particular, she specializes in household income and consumer finance across the United States. Follow her articles for useful advice and top tips, guides on how to save money and lots more.