How to pay off your payday loan early – for different payday lenders

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Paying off your payday loan early can save you money in fees and make it easier to manage your budget. However, not all lenders have the same rules in place when it comes to prepaying, and some may charge penalties for doing so. Read our list of lenders below to learn more.

Are you in financial difficulty?

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Do you really need a loan today?*

It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.

Check your options before borrowing:

  • For more information on other bill and debt management options, call 1800 007 007 from anywhere in Australia to speak to a free, independent financial adviser.
  • Talk to your electric, gas, phone or water provider to see if you can set up a payment plan
  • If you receive government benefits, ask if you can receive an advance from Centrelink: Telephone: 13 17 94

The government’s MoneySmart website shows you how small loans work and suggests other options that might help.

* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.

Which lenders allow prepayments?

The list below shows which lenders allow prepayments and how to arrange prepayment.

Cash converters Yes and you can get a discount Exam
cash train No. You can request changes to your repayment dates if you need to postpone a repayment. Exam
Credit24 Yes. Email [email protected] with the date you want to repay your loan. Exam
Fair Go Finance Yes Exam
Ferrata Nope Exam
MoneyMe Yes Exam
MoneySpot Yes Exam
Agile Yes. Call 133 156 or email [email protected] to discuss your payment options and receive a payment amount Exam
Stain Yes. You can make additional repayments and prepay the loan using the BPAY reference number on the online loan portal. Exam
Funding Swoosh Nope Exam
Sun Loans Yes. Contact Sunshine Loans to arrange payment. Exam
Portfolio Wizard Yes. You can make additional repayments outside of your scheduled direct debit to pay off your loan faster. Do it in the member area. Exam

How to repay a personal loan early

Before making prepayments or prepaying the entire loan, payday loan holders should consider the following:

  • Check their loan agreement for prepayment terms. A loan agreement establishes the fees or penalties that may be payable, as well as the stipulations relating to the early repayment of a loan. It’s best for people to be aware of this before contacting their lender about a prepayment.
  • Get in touch with their lender. The lender’s contact details can be found on their website, on the emails they sent to their customers, or on the loan agreement. Lending customers should inquire about how they can prepay the loan, what fees apply, and if savings or discounts are available. Payday loan customers should also ask how quickly they can settle the loan, because the faster it can be settled, the more money they can save.
  • Follow a lender’s instructions. Clients should follow the instructions given to them by the lender to ensure that the loan is repaid correctly.
  • Make sure the payment has been made and the loan is closed. After repaying the loan, it’s a good idea to make sure the account is closed to avoid erroneous charges.

Potential savings available by repaying a payday loan early

The amount a person can save will depend on how quickly they repay the loan and if there is a fee for doing so. It also depends on the type of payday loan the client currently has and whether it is a small or medium loan. If a loan was for less than $2,000, customers typically have to pay a 20% setup fee and a 4% monthly fee.

Example:

Sarah takes out a loan of $1,000 for a period of 3 months. Her setup fee is $200, her monthly fee is $120, and her semi-monthly repayments are $220. If she leaves her loan 1 month earlier, she will save $120 over the life of the loan.*

However, for average payday loans or loans over $2,000, lending customers are charged an annual interest rate (not to exceed 48% per annum). These repayments will typically be weekly, semi-monthly, or monthly and structured around when the person receiving the loan is paid. By repaying their loan early, someone will pay less interest over the life of their loan.

Example:

Joe takes out a loan of $3,000 over a period of 2 years. Assuming Joe pays an interest rate of 40% and a monthly fee of $10, his repayments are currently $194 per month and his total repayments at the end of a 2-year period would total $4,646. If Joe pays off his loan in just 1 year, his total repayments will be only $3,809, a savings of $837.*

*Please note that all examples are fictitious and do not take into account any penalty charges or fees that may be incurred by prepayments.

What are the risks of personal loans?

  • Disreputable lenders. Check that the lender has a credit license and does not charge you more than the ASIC allows. The lender must be easily reachable.
  • Unaffordable refunds. Consider the amount of regular repayments and make sure the loan can be repaid within the term of the loan. Otherwise, additional charges apply to extend it. Be careful, as the repayment periods for these types of loans tend to be shorter than regular loans.
  • Multiple requests. Every loan application appears on credit reports. Although lenders don’t take credit history into account, multiple inquiries over a short period of time can negatively impact your credit score in the future.
  • Check rates and fees. Set-up fees and monthly fees are capped, so beware of lenders who offer prices beyond the legal maximums. Be crystal clear about what will be charged for late payments or default on the loan. The total cost of the loan matters here – lenders can charge interest rates on top of everything else.
  • Long-term implications and legal issues. Once the loan agreement is signed, the client is bound by its conditions until payment of the loan and any associated rates and fees. Typically, these loans are unsecured, which means the lender can take legal action against the customer if they cannot repay.

How to Make Sure a Payday Loan’s Repayment Structure Is Fair

There are a number of factors to consider regarding payday loan repayments. Here’s what to look for:

  • How often do you make refunds? Usually, payday lenders set up direct debit repayments on the date their customers are paid. However, other lenders may let their customers choose the repayment frequency, with choices of weekly, semi-monthly, or monthly. Lending customers should ensure that this option will put them in the best position to have sufficient funds in their account when Direct Debit is taken out.
  • Are late fees excessive? Payday lenders are legally allowed to charge late payment fees, but there’s no cap on how much they can charge. It only takes one late payment or failed direct debit to see multiple charges pile up. For example, a lender may be able to charge you failed direct debit fees, daily late fees, collection letter fees, and other fees. A bank may also charge direct debit fees in addition to these fees. This could result in customers being charged $100 or more for a late payment if they don’t contact the lender ahead of time. Prospective payday loan applicants should remember to check any fees they may be charged before applying for a loan and choose a lender with lower fees, if possible. If someone thinks they might have trouble making a payment, they should contact the lender to defer the payment.
  • Is the lender easy to contact? The ease and flexibility of repayments depends a lot on the ease of contacting the lender. Check if the lender shows their contact number on their website and answers the phone, check if they have a live chat facility and you can also test how long it takes them to respond to an email .

Repayments are an important part of any payday loan because they can either help keep loan costs manageable by being flexible, or make the loan unmanageable by being too rigid. Among other things, payday loan customers should make sure they check to see if they can prepay their payday loan before applying.

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