Repaying a payday loan in advance allows payment to be made before the monthly deadline. To help you, find out what you need to know about this operation.
Pay off a payday loan in advance
Have you taken out a payday loan for the acquisition of movable property or for the realization of a project? Today, do you have the means to repay it even though the due date is still a long way off? You can then anticipate your refund.
Legal provisions for repaying a payday loan by anticipation
Although the term of a loan is provided for in the contract, the law does not prohibit you from paying it in advance. The code of consumption states that no bank or institution can refuse to be reimbursed for a payday loan in advance.
In such cases, the lender will have a shortfall on what it should have received, including the months of interest remaining to be covered but you will be well exempted from these interests and the corresponding costs if the amount of the early repayment amounts to less than 10,000 euros.
Otherwise, it is perfectly legal for the borrower to incur prepayment penalties and the lender to claim compensation for compensation.
In order for the provisions corresponding to this indemnity to be valid, they must be stipulated in the terms of the loan contract. The penalties, which are framed by the law, are equivalent to 1% of the total cost of the credit if the prepayment of the installment loan is made within a period of more than one year before the end date of the contract. If the repayment takes place in less than a year, they are reduced to 0.5%. In addition, the amount of the penalties can not exceed the total amount of interest due at the end of the term of the loan agreement.
Types of prepayment
A borrower who wishes to repay his consumer credit before the scheduled date may either repay all of his obligations in one monthly installment or partially repay the sums due to the lender.
In the latter case, the terms of repayment of the outstanding capital, ie the cost of borrowing, whose interest rate will be reduced, can be adjusted. The initial maturity date can be kept and the monthly payments lowered or defaulted, the monthly payments are kept and the due date advanced.
It must be taken into account that the minimum amount of a partial prepayment can be set by the lender. The limit is often set at the equivalent of 2 or 3 maturities. Beyond this limit, the lender can refuse the prepayment.
Procedures for repaying a payday loan in advance
If you want to repay your loan early, you must contact your bank to make it aware of your intention. The institution in question could ask you the reason for this decision. You will then have to officially inform the bank through a registered letter with acknowledgment of receipt and require a statement on the rest of the advance payment and the date scheduled for the due date.
To repay your loan, this formality is mandatory and must be made at least one month before the date of payment. Be careful, this date must correspond to the monthly maturity of the loan agreed in the credit agreement.