Can I Pay Payday Loans Back Early?

A common question that we find ourselves answering regularly regarding payday loans is that if you are able to (for whatever reason) pay back the payday loans before the designated payback date - are you able to do so?

There are essentially two issues at play here. The first is that payday loan are often given for a specific period of time - and all of the charges are applied to the loans in advance (i.e. when the loan is first taken out).

Therefore - if you were to pay it back early, you would actually be paying interest that you hadn’t accrued.

The second issue is that many companies have early repayment penalties - which can often be so steep that you are completely put off paying back a facility early. Let’s take a closer look at these two issues to see if we can resolve them in any way.

Interest Accrual and Early Payday Loans Repayment

Interest on payday loans can be relatively high when compared to other types of loans, and therefore the issue seems to be here that early repayment would be pointless because of the interest would still be charged anyway. In many cases this is correct - and it always pays to check with the finance company to see whether or not this is actually the case.

If you are required to pay the full term of interest regardless of whether you pay the loan back early or not - the obvious choice would be to keep the money and put it in to savings account instead of paying it back early. This would reduce the overall amount of interest that you would be paying, and therefore save you a small amount of money in interest charges.

Early Repayment Penalties

Another big financial barrier to early repayment is that more times than not you will be charged an early repayment fee. These fees can range from just a few dollars, all the way up to hundreds - usually depending on the size that the loan was in the first place.

Hence, do your homework before you make a payment to end the loan early - because you could find that doing so might actually be counterproductive, and could cost you more in the longer term than actually hanging on to the money and using it in the short term to earn interest in a savings account.