Transferring a payday loan can in many cases provide a lot of peace of mind. Usually because you can finance a necessary or desired investment thanks to this consumer credit form. Very pleasant if you do not have the required amount in an old sock yourself. Moreover, a payday loan is an exceptionally well-arranged form of a loan because almost all agreements are fixed in advance and are presented in clear black and white.
For example, with a payday loan, the term is agreed in advance, and the interest rate is also fully fixed during this agreed term. You can hardly have it more conveniently arranged. You know exactly how high the amount is that you borrow and moreover you know exactly how high the interest sum and the repayment are. So you always lose the same (calculated) amount per month.
So no hassle. That is, until you find out that you are much more economical with another lender. That happens to many consumers, and of course that doesn’t feel good. Transferring a payday loan is then often a logical step. But how exactly does payday loan transfer work? And are there perhaps snags still under the grass? These are questions that need to be answered before you can start to take out a payday loan in a relaxed manner, and you are also better off financially.
Transfer payday loan: points for attention
With a payday loan you make an appointment with the lender (for example a bank) that you borrow a certain amount during a certain term at a fixed interest rate. You can take that clarity into account, but at the same time the lender does the same: you go into the books.
Because the lender assumes (and may assume) that they will receive a set amount from you, namely interest, it makes sense that transferring the payday loan to another lender is not favorable for your current lender. He then misses out on money that he had lost
That is why a payday loan refinancing is often accompanied by a so-called penalty interest or refinancing fine. With this fine that you have to pay when you take out a payday loan, you compensate your current lender for the interest income that he will miss out on because you will leave as a customer. The penalty interest that you can expect is one thing, in addition you must ensure that the transfer is also arranged administratively.
Many lenders have the policy that the transfer of a payday loan is arranged in writing. You must therefore first repay the outstanding loan amount, and then you must submit a written statement stating that you want to officially terminate your loan.
Repay your payday loan (early)
If you want to have a payday loan transferred to another lender, you must repay your current payday loan in full. This often involves the aforementioned penalty interest. This is because early repayment is not possible free of charge for many loan providers. Fortunately, a number of rules have been formulated about the maximum amount that the penalty interest may have on early repayment.
These rules have been agreed at European level. In short, the fine for a loan that runs for a maximum of one year may not amount to more than 0.5 percent of the amount to be repaid. If the payday loan is still 1 year or longer, the penalty interest may amount to a maximum of 1 percent of the amount to be repaid. There are also a number of lenders where it is possible to redeem early free of charge.
It is therefore advisable to be properly informed about these options before you make a final decision to transfer your payday loan. Perhaps unnecessarily: if the costs that you incur for paying the penalty interest are higher than the advantage that another lender offers you (in terms of interest, for example), it makes no sense to take out a payday loan.
Transfer payday loan: comparison points
When you compare the different providers of a payday loan you may come across a number of interesting parties where you can save considerably when you switch. However, just looking at the interest rate is not sufficient for such a comparison. There are a number of other points that you will have to compare. For example, there is quite a difference between the various providers when it comes to arranging the administration.
With some loan providers you are expected to arrange the transfer completely yourself. That means quite a few administrative acts. On the other hand, there are also a large number of lenders who take the administration off your hands. They arrange the transfer, so you don’t have to do anything about it yourself anymore. For many people, this is an important point when choosing the right party. It is also possible for a number of financial service providers to bundle all the loans that you have at the same time as the transfer. If you have several small loans, this is a very interesting alternative. For loans where a small amount is outstanding, you usually pay a relatively high amount in interest.
By bundling various small loans it is possible to negotiate a more favorable interest rate for the ‘total package’. For example, transferring a payday loan may give you even more than you initially thought.