Payday loan has become a very widespread means to quickly cover up some unexpected expenses when they occur. However, the reason why you are taking it is of no importance to the lending company and you may spend it on vacation, shopping, bills, or whatever you want.
When it comes to the repayment of these loans, the process behind is probably very well-known and it is also stated in the name of the loan itself – you pay the loan back on your next payday. However, there are certain options that people might not be aware of. Thus, this article will deal with possible choices.
First comes the regular repayment method where you take a certain amount of money and your repayment period lasts as much as until you receive your next paycheck. This is the option that most people opt for since everyone wants to get out of debt as soon as possible. Apart from that, it is also the option where apart from the initial interest rate and fees you are charged with no other expenses.
However, not all people have the possibility to repay the whole amount of the loan within the next month (or even less, depending on the time between the moment you have taken the loan and your next payday). In this case, there are two additional options that they may choose.
One of the options is to pay the minimum amount of the total loan. This minimum amount is set by the lender and it varies from company to company. So, you pay the minimum amount and the rest of the loan is extended with a new contract. A new contract actually implies that, of course, you are entering a new repayment period. However, the amount that you will be charged upon the expiry of the new period is not based on the total of the initial loan, but on the new balance (with the minimum payment deducted from the original amount).
The other option is to pay an amount higher than the minimum and, of course, the repayment period will be extended with a new contract. In this case, however, the lending company will first apply the part of the loan that you decide to pay to the fees and they will apply the rest to the actual amount of the loan.
However, with some companies, the case is that if you decide to prolong the repayment period they will just keep adding fees to the whole amount of the loan for every additional month.
All in all, definitely the best solution for anyone is to pay the whole amount of the loan when your next paycheck is due. Otherwise, the loan will just keep getting bigger and bigger at a different pace depending on some of the above-mentioned options that you choose. In any case, just make sure that you are careful enough and do not let your debt amount to the quantities you will not be able to deal with.