If you don't have the money to pay back your payday loan? There are a…
Sometimes, you’ll come into a bit of extra money. This could be from work, or the sale of an expensive object, or a gift. In these moments, it’s tempting to make an extra repayment on the payday loan you’ve taken out. However, some people don’t know if making an extra payment is a good idea or not. To try and help, we’re taking a look at some of the pros and cons of doing this.
So what are the advantages of early repayment?
To begin with, let’s look at why making some early repayments is a good idea. The first and most obvious point is that you’ll pay the payday loan back faster. This means you won’t have the worry of payday loan payments on your mind for as long. As well as this, you also don’t pay interest on anything you pay back early. The quicker it’s paid back, the less likely you are to run into issues. These can include things like more interest being put onto your payday loan or missing a payment. For most people, paying back a payday loan quickly seems like the most sensible option by far. Getting a payday loan paid back ends your business with the payday loan company.
But are there disadvantages to paying back a payday loan early?
There can, of course, be disadvantages to paying back a payday loan early. If you have a low APR payday loan, then it might be worth staying in the current payment plan. The biggest issue is when payday loan companies charge you more for paying early. This may seem strange, but it can be a genuine problem. Early repayment fees are typical when you try and pay everything back at once. At a basic level, people with personal payday loans need to pay to clear their debts early. While this may seem very odd, it is a way that payday loan companies make money. If you stick to your original plan, you’ll need to pay interest, which benefits the company.
When you make a significant overpayment, it’s called a ‘partial early settlement’. What this means is that you’re paying off more of your payday loan than your agreement states. If your payday loan is from after February of 2011, you can pay up to £8000 in overpayment. Anything after that will see you get charged a fee for paying early.
So is paying back early a good idea?
Overall, there are both pros and cons to paying back early. Obviously, the faster you can pay back your payday loan, the better. However, you need to be careful when paying early. You can be charged money if you try and pay back more than your agreement says. Therefore, you need to make sure you’re paying less than the amount stated in a year. This will protect you from fees, and you won’t have to pay interest. No one wants a payday loan hanging over their heads, so they want to pay back quickly. It’s just a question of making sure you do so in a way that doesn’t rack up more fees.