Most payday loans in the past were to be repaid in 29 days. If you borrow money today, you need to repay it back plus interest on your next paycheck. But repayment terms have changed since then. More and more lenders are now offering flexible repayment terms. Instead of paying it in 29 days, you can now opt to repay your loan over 15 days up to 12 months. Loan offers range from £100 up to £2,000 at representative APR from 500% to 1,500%.
Due to its high cost and very steep interest rates, payday loans have gotten a negative reputation in the UK lending market. But regardless of what experts may say, the loan product continues to thrive in the UK. For its promise of quick cash alone, payday loans have been attracting borrowers left and right especially those with poor credit ratings.
When approved for a payday loan, there’s really one thing you need to think about—repayment. Understanding the repayment aspect of payday loan is key if you want to ensure that you’re getting the best end of the deal.
Recurring payment option
There are different ways to repay your payday loan but recurring payments may just be the type you must thoroughly understand before you close any payday loan deal. When you’re almost ready to get approved for a payday loan, your lender will convince you to opt for recurring payments. This type of payment option is also known as continuous payment authority. It is important that you understand the details behind this payment option before you agree to it.
When you agree with recurring payments, you are essentially allowing your lender to automatically take from your debit card or credit card. Once your repayment date hits, your lender takes your loan plus interest from your account. It is imperative that you ensure you have sufficient funds in your account when it’s time for payment collection. In the event that your funds are insufficient, you are likely to incur late payment fees added to your current due. Your lender will also still take your payment even if you’ll end up with insufficient funds for other bills.
Other payment options to consider
If you’re not comfortable with the recurring payment option, there are other methods you can choose from. The direct debit arrangement is a payment method where you approve a third party to collect the payments from your debit account. This option will take longer to arrange but it’s secure because you have the Direct Debit Guarantee Scheme to benefit from. On one hand, some payday lenders may not offer this type of payment option for borrowers.
If the direct debit is not available, you can check out the standing order. This is another type of payment option where you give authority to your bank to make the repayments for you. You’ll just need to sign a form, set the payment amount, date of repayment and you’re good to go.
Another payment option that’s not always convenient but still worth considering is manual payment through an accredited payment centre. If you insist on not using the other aforementioned payment options, your payday lender may let you to do it yourself. You may feel comfortable with this set-up but it won’t always be convenient.
If you do opt for a recurring payment or direct debit, however, there’s really not much to worry about. You can cancel your repayment set-ups anytime. All you need to do is contact your bank and inform them of your decision. It’s a matter of how fast your bank can cancel the repayment arrangement after your call.