The rise to prominence of payday loans has been nothing short of phenomenal. A decade ago very few people would have the faintest clue what they even were. However, today thousands of people are applying for these short-term cash advances each and every month. But a payday loan isn't like a standard loan, with the most notable difference being the way in which it is repaid.
When you get a loan from your bank or another lender, it tends to be for a substantial sum, which is then paid back over a number of months. Interest will be charged to the overall sum based on a pre-determined rate (known as APR). This will be debited from your account on an agreed date each month until the loan is repaid in full.
This is a simple enough process and has been in place for decades, if not centuries. However, the payday loan has changed the field somewhat.
Rather than paying the remaining balance off in chunks, a payday loan is repayable in full on your next payday. Therefore, during the application process you will be asked what date you are going to be paid next and this will automatically become the same date on which the money is taken from your account.
The whole process is swift and automated. Therefore the quickest way to repay is simply to have the funds available on the agreed date and wait for the payday loan company to simply collect the funds. Some will allow you to pay the full amount early; however, this is unlikely to see you save any money unless your interest is calculated daily - which is rare.
Interest on a payday loan also isn't calculated in the same fashion as the long-term equivalent. This is for a good reason too. As a payday loan is ordinarily for smaller amount and will cover a maximum of one month, it simply wouldn't be viable for most lenders to offer rates that are comparable to a bank loan.
If a payday loan provider was to offer loans at 12% APR and lent a customer 100 pounds, they would only be able to collect one solitary pound in interest when repayment was due. If that customer were to default or be unable to repay the loan for any reason, the lender would be massively out of pocket. As a result, and to avoid this situation arising, they have to take risk into account and charge a higher base rate of interest.
This will generally mean that you end up paying 15-25% of the total amount borrowed. Whilst certainly higher than you'd experience elsewhere, this still isn't anywhere near as damaging as the 1,750%+ APR that payday loan companies usually advertise.
From start to finish, the process is generally far quicker and more convenient than any other form of borrowing. There are no extensive forms to fill in, phone calls to discuss your health and work situation or days left waiting for a decision. The application is straightforward, the decision is often almost instant (with many companies not even requiring you to fax documents) and the cash is often delivered within a matter of hours. It is this convenience that has made payday loans as popular as they are today.
So in answer to the question within the title, the quickest way to pay off a payday loan is also the simplest, just wait for the lender to take it from your bank account. They will have collected these details when the funds were transferred to the account in the first instance and the total repayable amount agreed.
When you get a loan from your bank or another lender, it tends to be for a substantial sum, which is then paid back over a number of months. Interest will be charged to the overall sum based on a pre-determined rate (known as APR). This will be debited from your account on an agreed date each month until the loan is repaid in full.
This is a simple enough process and has been in place for decades, if not centuries. However, the payday loan has changed the field somewhat.
Rather than paying the remaining balance off in chunks, a payday loan is repayable in full on your next payday. Therefore, during the application process you will be asked what date you are going to be paid next and this will automatically become the same date on which the money is taken from your account.
The whole process is swift and automated. Therefore the quickest way to repay is simply to have the funds available on the agreed date and wait for the payday loan company to simply collect the funds. Some will allow you to pay the full amount early; however, this is unlikely to see you save any money unless your interest is calculated daily - which is rare.
Interest on a payday loan also isn't calculated in the same fashion as the long-term equivalent. This is for a good reason too. As a payday loan is ordinarily for smaller amount and will cover a maximum of one month, it simply wouldn't be viable for most lenders to offer rates that are comparable to a bank loan.
If a payday loan provider was to offer loans at 12% APR and lent a customer 100 pounds, they would only be able to collect one solitary pound in interest when repayment was due. If that customer were to default or be unable to repay the loan for any reason, the lender would be massively out of pocket. As a result, and to avoid this situation arising, they have to take risk into account and charge a higher base rate of interest.
This will generally mean that you end up paying 15-25% of the total amount borrowed. Whilst certainly higher than you'd experience elsewhere, this still isn't anywhere near as damaging as the 1,750%+ APR that payday loan companies usually advertise.
From start to finish, the process is generally far quicker and more convenient than any other form of borrowing. There are no extensive forms to fill in, phone calls to discuss your health and work situation or days left waiting for a decision. The application is straightforward, the decision is often almost instant (with many companies not even requiring you to fax documents) and the cash is often delivered within a matter of hours. It is this convenience that has made payday loans as popular as they are today.
So in answer to the question within the title, the quickest way to pay off a payday loan is also the simplest, just wait for the lender to take it from your bank account. They will have collected these details when the funds were transferred to the account in the first instance and the total repayable amount agreed.