How do I repay a payday loan?

Answer: In order to obtain a payday loan, you typically must either provide a personal check to the lender or an ACH (Automated Clearing House) authorization to electronically withdraw money from your bank, credit union, or prepaid card account. Carefully read your loan documents so you know exactly how repayment works.

Although you are generally required when obtaining a loan to provide a post-dated check or authorization for an electronic debit of your account, some lenders strongly encourage, or in some cases, require consumers to return to the store when the loan is due to “redeem” the check. Encouraging or requiring borrowers to return to the store on the due date provides lenders an opportunity to offer borrowers the option to roll over the loan or, where rollovers are prohibited by state law, to reborrow following repayment or after the expiration of any cooling off period.

If you do not return, your lender might repay itself by depositing your check to your bank or credit union or withdrawing funds electronically from your account.

If you have taken out a loan online, you likely provided an ACH authorization for the lender to electronically access your checking account for repayment on the loan due date. So, while the way you repay a loan may depend on whether you took out a loan in a storefront or online, usually you provide the lender a way to repay itself the full amount as part of the loan application process.

Some lenders might set up payments assuming you only want to pay a renewal fee on the loan’s due date and require you to take action several days before your loan comes due to pay it in full. This could result in you paying several rounds of renewal fees while still owing the entire original loan amount.

Make sure you understand how your loan will be repaid and how much the loan could ultimately cost you before agreeing to get any type of loan.

If you have problems with a payment authorization, such as the ACH was unauthorized or revoked, you may want to contact your state regulator or state attorney general. You can also submit a complaint to the CFPB at consumerfinance.gov/complaint or (855) 411-2372.

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