The Best Ways to Pay Off a Payday Loan?

Without any doubt whatsoever, the best way to pay off a payday loan is to do so on time and in full. If you fail to have the funds available on the agreed date you could be walking straight into a significant financial issue. However, there are other alternatives, as I'll look to explore here.

Some lenders will enable early repayments on a payday loan, others won't. The only real time that this becomes a particular issue is if you have chosen to borrow money from a company who accumulate interest on a daily basis.

It's worth noting that most payday loan providers work on a one-off charge basis. Therefore, regardless of how long you borrow funds for, it will always cost the same - unless you go beyond the agreed date. However, in the rare instances where a daily charge is applied, you could find that you save a little money by paying the balance, either partially or in full, before the deadline. This is something that you will have to establish before you actually apply though; another good reason to read the terms and conditions.

When you are completing the application, the lender will always ask for a valid bank account that is registered in your name and the country in which you are applying. Not only does this help to verify your identity, it will also serve as the account to which the money is transferred and eventually removed. This part of the process is entirely automated, which means that you need to ensure that all details are accurate and that you have arranged a date on which money will be available.

As a part of this application, the payday loan company will usually ask when your next pay date is. This will often become your repayment time by default, unless you arrange differently. Most lenders will have a strict limit on how long you can actually borrow funds for. This means that you will often be restricted to dates within the next 30 days or four weeks. This is fairly standard practice, as it helps to avoid encouraging borrowers who aren't able to meet the criteria of short-term lenders. So if you aren't going to have enough to repay it within a month, why should they lend to you?

Of course it's important to remember that this form of borrowing is very different to the more prolonged type that you may have encountered with a conventional personal loan. You aren't given months to provide the funds back, and there are certainly no spread payments. A payday loan is paid off in one full chunk. Your interest, charges and original borrowing amount will all be taken on a set date.

Returning to the point made at the very beginning of this article, failure to repay a payday loan can be extremely costly indeed. First of all you will be charged a set fee for missing the date. Then you will be contacted to try to arrange an alternative payment time. If more time is needed, you will usually also be charged an additional month's interest. Worse still, this will often be applied to the total amount - inclusive of the charge, initial interest and the loan itself. This could see your total costs spiral out of control.

Therefore, to reiterate the earlier point, the only real way that you can contemplate taking out a payday loan is if you are sure that you can repay on time. Whilst you may be able to negotiate an early payoff, there is absolutely no benefit in rolling over a loan beyond your pay date.

Vincent Rogers is a finance writer who writes for a number of UK companies. For payday loan lenders, he recommends Paydayplus.co.uk