A Homeowner’s Guide to Paying Back a Payday Loan

Repaying a payday loan means giving back a short-term, high-interest loan on time, usually taken to meet urgent financial needs until the next payday. These loans are designed to offer temporary help for those dealing with unexpected costs or money emergencies. The borrower has to return the main amount, along with any added interest and charges, by their upcoming paycheque or within a certain period.

Taking out a payday loan can be a quick and easy way to get a hold of some cash when you’re running short. When it comes time to pay it back, though, how can borrowers clear their loan?

Discover the steps to successfully paying back a payday loan.

Pay in person

If the loan was borrowed from a physical payday lender shop, borrowers can just go right into the shop and pay off the loan with debit, cash, or cheque.

Leave a cheque

Again, when the loan is taken out for physical payday lenders, a post-dated cheque can be left with the lender for the loan’s due date. This was traditionally how payday loans would be paid back. It’s not common since the digital age is more prevalent now, and cheques are going by the wayside. That said, it’s still a valid way to repay the loan.

Electronic payment

Modern payday loans do things much more electronically. There is nowhere to show up to give cash or a cheque, so instead, you can use your online banking to pay the bill.

Borrowing from a friend

If a loan deadline is coming up and the borrower is still short, it’s time to start thinking outside the box. With payday loans, defaulting on the loan is where the fees start piling up. Borrowers should consider their options and find alternative methods to avoid this at all costs.

One such option could be borrowing from a family member or a friend. Often these individuals won’t charge interest or fees, so they can sometimes be a helpful resource when a borrower is really in trouble.

Rollover the loan

Many payday lenders will offer the option of rolling over the loan into a subsequent loan. In this case, the borrower must only pay the accrued fees of the original loan and then be given a new deadline by which to pay the loan back.

Think of it this way: the lender essentially pays off the old loan with a new one. The borrower will have a new set of fees to pay but avoids any negative effects to their credit and the heavy interest fees that come with defaulting on a payday loan.

Pay with another loan

Payday loans are great because they can be acquired so quickly. Borrowers may know that they won’t have the money by the time they pay their loan, but taking out that loan does buy them some time.

In that time, they could find a more long-term loan option with lower interest rates or a method of revolving credit like a line of credit or a credit card. One of these methods would allow the borrower to advance cash to pay off the payday loan.

Planning ahead

Again, one of the benefits of the payday loan is that it buys time. Ideally, borrowers could pay off their loan with their regular income, but life just doesn’t always work that way.

However, when the borrower has to pay the loan back, they could find an alternative way to make money. For instance, working a side job, selling some items, crafting items to sell, or even building a solid budget can help.

Take a minute

Financial worries can be overwhelming, causing borrowers to make knee-jerk reactions to find a solution to an immediate problem. If the money is not available to pay back the payday loan, borrowers should try taking a step back and regrouping to find a logical solution.