You may be able to cancel your payday loan. This is dependent on a few significant factors, including when you signed the agreement and whether your lender has abided by the rules.
If you are able to cancel your payday loan, you may still have to pay interest on the amount of time that the loan was borrowed for.
A payday loan can then be considered to be entirely cancelled once it has been fully paid off and communication has been made to let the lender know.
What are Payday Loans?
Payday loans are short-term, high-interest monetary loans and take place between a lender and a borrower. This usually occurs when the borrower is unable to seek this amount from banks or credit unions.
The majority of payday lenders charge very high interest rates, and in some states, this amount that they charge is not regulated.
Typically, there is a strict time period in which you are expected to pay back the loan. This lies between around 14 to 28 days.
If you are unable to pay back the loan on time, then you will be charged high interest rates until it is paid back, which can lead to spiraling debt in some instances.
Why Would I Cancel my Payday Loan?
There are a number of reasons as to why you may be needing to cancel a payday loan. For instance, in some cases when you need money fast, it may be easier to borrow the cash from friends or family. This may mean that you do not need to pay any interest. Further alternative options instead of payday loans could include using a credit union or requesting a low interest credit card.
Payday loans may become too much of a financial burden for some, especially those with already poor credit scores.
In some instances, borrowers may find that they no longer need the cash. They may have been given a longer deadline to pay off a particular bill, or no longer need to fund a certain pressing expense. This may mean that they will want to opt out of the payday loan, especially due to the risks associated with its high interest rates.
How can I Cancel my Payday Loan?
There are three key steps that must be followed so that a payday loan is successfully cancelled:
- Contact the lender to let them know that you would like to cancel the payday loan. This could be by email or telephone call and their contact details should be readily available on their email.
- You may now need to pay off any interest that has built up. This is because payday loans typically accrue a daily interest. For example, if the loan has been open for 7 days, you may need to pay off 7 days of interest.
- Await confirmation from the lender. You will then no longer be eligible for further payment and you can consider the payday loan to be entirely cancelled.
Will Cancelling my Payday Loan Impact my Credit Score?
Cancelling your payday loan will not impact your credit score as long as the loan has been entirely cleared, and the interest rate costs accrued have been paid off.
Can a Lender Charge me Even if I Cancel Early On?
Lenders are still able to charge you interest even if you want to cancel after a few days. From the day the loan is approved and funded, you will start to accrue interest on it daily.
Some payday loan lenders may offer a cooling period of 24 or 48 hours. This cooling period allows borrowers to return and cancel the payday loan without paying any fees. When taking out a payday loan, it is important to look out for this in the paperwork.
On top of charging daily interest, some lenders may additionally charge admin fees. This includes covering costs to process, underwrite and even credit check the borrower.
As such, it may come at a cost to cancel your payday loan, even after just a few days.
Do I Have the Right to Cancel my Payday Loan?
As mentioned above, there can be a number of reasons as to why you may want to cancel your payday loan. However, it is also important to note that if the lender is not playing by the rules, you are entitled to cancel your payday loan. Some reasons for this may include:
- The lender did not tell you about the full cost of the loan
- The lender did not inform you of your cancellation rights
- The lender did not include the required information in the agreement
- The lender did not provide a cancellation notice or copy of the agreement when it was signed.
Further, there are some rules that payday lenders can not break. This includes the following:
- Providing you with a second payday loan while the first payday loan is still outstanding
- Providing the borrower with a loan that amounts to over 50% of their net income
- Demanding repayment before the agreed due date
- Asking a borrower’s employer to take payment from their wages