We’re all still living in the aftermath of the global COVID-19 outbreak, which is why it’s normal that some of us experience financial problems from time to time. Because of this, you might have opted for taking out a short-term loan, commonly referred to as a payday loan. If you found yourself in a situation where you had to take out this short-term loan, you may be wondering whether or not you can pay it off early. To answer this question right away, yes, you can pay off this type of loan earlier. However, there are some FAQs that you should read first, especially since this will help you determine if you should make payment earlier. Here is what you must know:
1. Can I Make an Early Repayment?
We’ve already mentioned that you can make an early payment if you want to, however, there are some things that you should know about doing this. For starters, there are some charges that you might be subjected to referred to as early payment fees. Now, it’s highly possible that you agreed to these when you took out the loan, however, if you didn’t read the contract, you might not be aware of it, hence, you should check the document. You should know, even if the lending organization claims that it doesn’t charge these fees, there still might be some hidden expenses that you aren’t aware of. For instance, the CCR could end up charging you for two months of additional interest rates if you opt for paying off the loan earlier than you should. Because of this, it might be a good idea for you to check whether or not the lending organization charges extra fees.
2. What Do I Have to Consider?
Before you choose to settle the payday loan early, there are some things that you must consider. For starters, think about the monthly expenses you have, which can include things such as your bills, groceries, rent, as well as college tuition, but you must also consider what your lifestyle requires as well. Also, don’t forget to think about the other debts you have, mostly because you’ll also need to make those payments on time. For instance, if you’ve taken out a car loan, you cannot miss making a payment since if you do, you’re risking losing it entirely. Additionally, skipping such monthly installments can cause your credit score to go down – which is something that you must avoid. Hence, before you cash out, you must make sure that you think about how much money you’ll have left after paying for all the things you require in a month.
3. Are There Any Benefits I Could Gain?
Of course, there are benefits of settling a loan earlier. The first and, perhaps, most important benefit that you could gain is that you can actually save money. How is that possible? Well, according to the experts from SpeedyCash, by settling a loan earlier, you won’t have to pay the lender more money in interest, thus, you can use that money for some other monthly expenses that you have such as paying your electricity bill. But, besides using it for that, you could also choose to place that money in a savings fund, thus, if you ever find yourself in a tight financial situation in the future, you could use the fund as an emergency one or you could also choose to use it for making specific investments, something that can help you earn money in the future. Also, let’s not forget that your credit score won’t be influenced, which is why you might feel emotionally better as well.
4. And Are There Any Drawbacks?
Well, we’ve already mentioned some of them, but let’s go into the details. One of the drawbacks that you might come across is that you’ll have less money in a month if you opt for paying for it earlier, and because of this, it’s important to consider all of the things we’ve previously mentioned. If you determine that you won’t have enough cash for surviving a month, then it’s better to continue making the monthly payments than to settle it. Additionally, if you make the whole payment, you won’t have any cash left to make investments or to place in your savings account, thus, you could end up losing money if a really good opportunity arises. Lastly, as we’ve stated, there are some penalties that you might have to pay if you settle the loan earlier, hence if you want to avoid this particular situation, you must ensure that you speak to the representative of the lending organization.
5. Will it Boost My Credit Score?
Although a lot of people think that settling the loan will result in boosting their credit score, this isn’t always the case. Why? Well, it’ll depend on what else is in the report. For example, you might notice that it has dropped, especially if you don’t have any other loans. Nonetheless, the report will show that you’ve settled in, but it doesn’t mean that it’ll help you boost the credit score you currently have.
6. What About Paying Off Other Loans Earlier?
Before we conclude this article, it’s important that we mention that it might not be wise to settle some other loans such as student loans ahead of time. Why? Well, the interest rates are usually lower than personal ones, hence, if you settle it all at once, you could end up losing money instead of saving it. Thus, before you make a decision like this one, it might be wise to consult with your lawyer or financial advisor.
If you’re thinking about settling a payday loan earlier than you should, there is a wide range of benefits that you could gain. Now, you should keep in mind all of the advice we’ve mentioned above, and by doing so, you can guarantee that you aren’t charged additional fees for settling a loan earlier. Since you’re now well aware of what you should know about paying off payday loans earlier, don’t lose time. Instead, you should ask your lender about the fees they might charge, think about the monthly expenses you have, and from there, determine whether or not you should settle the loan earlier.