The amount of the overpayment depends on how you pay the loan. Some microfinance organizations offer only one payment method on their websites. You go to your personal account, click “Pay”, a window appears, enter the amount of payment under the agreement, but the total amount is calculated with interest. A person who does not know that there are other legal ways to repay a payday loan falls into this trap and overpays.
The ways to pay for payday loans
Option#1: in the branch of the payday lending service
This is a free way to repay a payday loan. Take your ID, agreement and go to the nearest lending office. If the contract is lost, it’s not scary. An ID is enough. You can repay your loan at any branch of the company, and not only in the one where you took out the payday loan. If you applied online and received a loan for a bank card, it’s not a problem either. Payment will be accepted in any case, and interest will not be accured.
What to consider: it is better to change money immediately, if you have large bills, and prepare the necessary amount. There may be no change, and you will have to go for change.
Option#2: using the bank details of the payday lending service
Enter the personal account of the bank’s mobile application and select “payment by details”. Your bank will charge a small fee for the operation.
Find out in your bank what commission it charges for transfers to the account of the bank in which the microfinance organization account is opened.
What to consider: the transfer to the MFI by bank details takes up to 3 working days. The time of receipt of money to the account should be taken into account in order to prevent delinquency on the loan. In addition, while the money is on the way, the interest continues to grow.
Option#3: on the website or in the application using a bank card
Client-oriented microfinance organizations do not take interest for repayment of a small loan through their website and mobile application. Or they take a very small fee – less than the banks for the transfer of the details.
How to pay: log in to your personal account through the website or mobile application of the payay lending services, choose the payment method by bank card. Enter the card number and expiration date, the CVV code. Payment takes place instantly. The loan is considered repaid at the time of receipt of money.
Advantages of this payment option:
- you can pay the loan on the last day and even the last hour – there will be no delay;
- the interest in many MFIs is lower than the interest for the transfer of bank details.
The only case when a credit card payment is justified is if you took a large amount to the MFO and there was a delay. And the bank has increased your card limit. Then it is better to immediately pay the loan with a credit card at a maximum of 50% per annum, than to accumulate debts on a short-term loan with an overpayment of 365% per annum.
Option #4: through payment systems
A convenient way to repay loans is to pay via e-wallet, for example, PayPal. The interest depends on the specific MFI: somewhere you can pay it off for free, somewhere they take a small fee.
You can pay off a payday loan for free with the help of money transfer systems. To make a payment, you will need: an IDand the number of the payday loan agreement.
Should I pay in parts or all at once? Do you pay less interest if you pay off a loan early?
You can repay a payday loan in part or in full, on time according to the payment schedule or ahead of schedule. Which is more profitable?
It depends on the terms of the agreement. For example, early repayment is beneficial in most cases: it allows you to recalculate interest downwards. If you used the money for 10 days, then you pay interest only for 10 days.
But this is not the case in all microfinance organizations. Some companies, even well-known and reliable ones do not provide such an opportunity. The borrower must immediately indicate for what period he takes cash out, and in case of early repayment pays for the entire period for which he requested the loan. In this case, it is better to take money for the minimum allowable period, and then extend it for the required number of days.
It is profitable to pay the debt in parts only if these parts are paid before the loan expiration. So the overpayment will be less. And if you extend the loan term in parts, on the contrary, you will pay more interest, because the period of use of money will increase.
If this happens, immediately call the technical support of the lending service, address the online chat and demand to cancel the extension that you did not request.