11th November 2014
Payday loan repayments are typically made when you receive your salary next in your account. This is usually the last working day of the month for most people but some borrowers get paid weekly or four-weekly or on a specific day of the month. When your loan repayment is due, the lender wants to ensure that your funds are available for collection so if you have just received your salary into your account, it is more likely that you will have sufficient funds for repayment.
Various lenders offer difference flexibility. There are some lenders like Satsuma Loans where the money comes out of your debit account weekly. There are some lenders that only collect on your next pay date such as . When the salary comes out of your next pay date and is clear, this is a standard payday loan and is characterised by only lasting for 14 to 30 days. This is different to an instalment loan where lenders such as Wizzcash and Pounds to Pocket offer 3 month, 6 month and 12 month loans and customers can repay each month in equal monthly instalments. There is also the option to not pay in equal instalments like with Mr Lender.
The repayment option will depend on the requirements of the borrower. For some who have taken out a high cost short-term loan, they will prefer to simply clear their account on their next pay date. Therefore a payday loan is geared towards covering short term emergency expenses.
By comparison, an instalment loan offers more flexibility and will be better suited to someone who has a longer term expense. The option to repay smaller amounts each month means the customer keeps the initial sum they borrowed for longer before having to repay in full.
Yes, most lenders will allow you to repay your payday loan early. This is a very responsible thing for the lender to offer because if you can clear your debt early – why not! For some lenders that we featured on The Lenders List, you can repay early and it is cheaper to do so. For example, with lender Sunny, you are charged a daily interest so once you have repaid your loan, the daily interest is no longer added. So this way, it is cheaper to repay your loan.
There are also lenders such as Quickquid who allow you to repay early but it does not change the cost of your loan. Something known as ‘Right of Withdrawal’ means that you can cancel your loan up to 14 days of taking it out so if you are able to clear your loan in that time, you can see if this rule applies and therefore you may not have to pay extra for repaying early. Some lenders have transmissions or admin fees or faster repayment fees but these won’t be deducted if you repay early.
Payday loan repayments are made through your debit account. This is why the lender requires your debit card details upon applying for a loan. Many borrowers think that they are paying via a direct debit but this is not actually how payday loan repayments work.
According to the regulation, repayments must be collected via Continuous Payment Authority. This is similar to a direct debit but the way it works is that the lender tokenises your card when you apply and then they can collect at an arranged time and date. This is why lenders also ask for your pay date so they can set up the Continuous Payment Authority to collect on that specific date. Due to regulation, lenders are limited to two attempts on the account per day. Since borrowers cannot cancel the payment set up on their end, like with a direct debit, they can simply contact the lender or their bank if they wish to cancel this.