Did you take out a payroll loan in installments that did not weigh in your pocket, but now you are able to advance the installments? There is a simple way to settle your debt before the end of the contract: the prepayment of the payroll loan.
Even with multiple installments due, it is possible to request that the debt balance be calculated so that you can pay it at once.
What does it mean to pay off the payroll loan in advance?
If you have extra money and are thinking about this possibility, keep reading, because we will tell you everything you need to know about how to pay off payroll loans in advance!
The payroll loan:
The payroll loan differs from other types of credit due to certain factors: interest rates tend to be lower, installment terms may be longer and payment is automatically debited from the borrower’s salary or benefit.
This payment method makes the payroll loan a very safe operation for banks, since payroll discounts significantly reduce delinquency.
In this dynamic, however, it is agreed that the value of the installments will be discounted monthly from the receipt of the policyholder until the contract is fully settled.
Because of this, some people think that it is very complicated to anticipate the payment of the payroll loan. But that’s not true!
The consumer can renegotiate his debt, either to increase the number of installments (an operation called refinancing), or even to request the total repayment of the loan.
In this sense, paying off payroll loans in advance means expressing the desire to pay the missing installments at once, before they reach their original maturities.
Upon discharge, the borrower no longer has a bond with the bank or financial institution that granted the loan and will no longer have to rely on monthly debits in his account.
Why pay off payroll loans in advance?
Generally, the payroll loan offers the possibility to split the amount taken in up to 96 installments, depending on the applicant’s profile. The idea is to dilute the credit so that it does not harm the financial organization of the person applying for the credit.
But if you got extra money, one option is to direct you to advance payments on your payroll loan. Early payment can be very advantageous, especially for those who have enough budget to cover the value of the missing installments and want to save on the loan payment.
The main advantages are:
More savings: the main benefit of paying off the payroll loan in advance is that you avoid paying interest on installments that have not yet matured. Since they have not yet been charged, the interest amount is not applied and the consumer pays the “original” cost of the installment, without fees.
In this sense, paying off the loan in advance can help significantly reduce the value of your debt, generating more savings in the long run.
It is important to make it clear, however, that there is no refund of interest on installments that have already been paid. The rebate is considered only on installments that have not yet fallen due.
Refundable consignment margin: Another positive point is that paying off payroll loans frees consignable margin so that you can make another credit request in the future, should you need it.
The consignable margin corresponds to 30% of the borrower’s receipt, and every time he requests payroll loans it is reduced.
That way, the sooner you can settle your debt, the faster you will have your full margin back and you can apply for a new loan when you need it.
As soon as the payroll loan is repaid, the installments will no longer be deducted from your salary or benefit. With that, you have more freedom to manage your finances and spend as you want!
When to apply for early loan repayment?
The prepayment of payroll loans can be considered whenever the consumer has capital available to settle the installments that have yet to be paid.
Did you receive your thirteenth, vacation or a bonus? Did you sell some items and have a break in your budget? Has the salary increased or earned extra income? Did you receive unexpected money, like an inheritance? All of these are situations where you can think about paying off the payroll loan in advance.
However, it is important to note that this practice is only recommended if the settlement of the installments is not going to seriously compromise your budget!
If you come to the conclusion that the early repayment of the loan will harm your financial organization in some way, then the best alternative is to continue paying the installments until the end of the contract or to pay off at another time.
Payroll loan: payment step by step
We have reached the moment you were probably waiting for: step by step on how to pay off payroll loans in advance!
This is a relatively simple process, but it is important to be attentive to each step and to know some information to ensure the fulfillment of your rights.
- Request the discharge : the first step is to contact the bank or financial institution that brokered your payroll loan application and express your desire to pay the contract.
- Be informed about the values : the institution must add the value of the installments that are still open, already discounting the interest, since they have not yet matured. Then, you will need to send a payment slip or request authorization to debit your account.
- Check the values : as the payroll fees are low, it is common to get confused and think that you are not paying the interest, when in fact they are still embedded in the calculation.
To avoid any mistake or setback, it is worth confirming in your contract the amount of the interest rate and calculate on your own the sum of the installments that have not yet been paid. And if you have any questions or feel unsure about the procedure, talk to the bank.