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Can you repay your payday loan early?

Find out which lenders let you repay your loan early and how much you can save

⚠️ Warning: be cautious with short-term loans

If you're experiencing financial hardship and would like to speak to someone for free financial counselling, you can call the MoneyTalks helpline operated by FinCap on 0800 345 123. It is open from 8:00am to 5pm, Monday to Friday and 10am to 2pm Saturday. When comparing short term loans, ensure you take into consideration any fees, charges and rates you may be charged.

Alternatives to short-term loans

Consider these alternatives before applying for a payday loan:

  • Use online Government resources. The Commerce Commission New Zealand website explains how loans works and what to be aware of when borrowing from a lender.
  • Payment plans. Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan or receive an extension on your due date if you’re behind on payments.
  • Contact your creditors. Speak with creditors about extending the due date of your payment, or working out a new payment plan that works for both of you. Seek personal loans elsewhere. Consider a small personal loan from a bank or a credit union. You may qualify for a loan with much lower interest rates than those offered by payday loan companies.
  • Pay with credit card. Consider paying with your credit card to cover your emergency bills or payments. This is not a long term solution, as you’ll need to pay off the balance as soon as possible, but it’s an alternative to a short term loan with high – and immediate – interest rates.
Name Product Max Loan Amount Loan Term Turnaround Time Loan Interest Establishment Fee Account Administration Fee
Moola Loan
90 - 182 days
Often available in under 60 minutes
292% p.a.
(fixed for the term of the loan)
Eligibility: Be 18 or over, be in employment and be a New Zealand citizen, permanent resident or have a valid working visa.
Borrow up to $1,500 and enjoy a flexible repayment plan.
Save My Bacon Flex Loan
12-36 months
Same day
49.95% p.a
Eligibility: Be 18 or over, have an income of at least $400 per week and be a NZ citizen, permanent resident or have a valid work visa.
Medium term loans from $2,000 to $5,000 with no hidden fees.

Compare up to 4 providers

If you’re in a position to repay your payday loan ahead of schedule, great! It can save you money in fees and make your budget more simple to manage. However, not all lenders have the same rules in place when it comes to repaying your loan early. This guide takes you through what you need to know.

How do you repay a payday loan early?

There are a few things you need to do if you want to make early repayments to your payday loan or repay the entire loan ahead of time. These includes:

  • Checking your loan contract for early repayment terms and conditions. Your loan contract explains any fees or penalties you might have to pay, as well as any stipulations regarding the early repayment of the loan. It’s best to be aware of these before you get in touch with your lender.
  • Contact your lender. You can find your lender’s contact details on its website, on emails they have sent you or on your loan contract. Ask how you can repay the loan early, what fees apply and if any saving or discount is available. You should also ask how quickly you can settle the loan because the earlier you do so, the more you can save.
  • Follow your lender’s instructions. Follow the instructions the lender provides, to ensure you pay the loan out correctly.
  • Make sure the payment has gone through, and the lender closes the loan. After you pay the loan out, make sure the lender closes the account to avoid mistaken charges.

How much can I save by paying out my loan early?

The amount you save depends on how early you repay the loan. The lender charges an annual interest rate. Your repayments are generally weekly, fortnightly or monthly and the provider structures them around when you receive your pay. By repaying your loan early, you pay less interest on the credit.

How do I make sure a payday loan’s repayment structure is fair?

There are certain factors to consider around payday loan repayments. Here is what to look for:

  • How frequently do you make repayments? Usually, payday lenders set up direct debit repayments in line with your payday. However, others may let you select the repayment frequency, with a choice between weekly, fortnightly or monthly. Make sure that whatever option you choose, or what the lender offers, enables you to have sufficient funds in your account when the direct debit is taken out.
  • Are the late repayment fees excessive? Payday lenders can legally charge late payment fees, but there is no cap on the amount. So, some lenders charge more than others. It only takes one late payment or for a direct debit to fail to see multiple charges stack up. For example, a lender may charge you a failed direct debit fee; a daily late charge; a collections letter fee and other costs. Your bank can also charge you a failed direct debit fee, which could see you paying $100 or more for one late payment if you don’t contact the lender. Remember to check every fee the lender may charge before applying for a loan and choose one with fewer costs. If you think you might have trouble making a payment, contact the lender to reschedule it.
  • Is the lender easy to contact? Ease and flexibility with repayments depend a lot on the lender being easy to reach. Check whether the lender displays its contact number on the website and answers the phone, see if it has a live chat service and also test how long it takes for the provider to respond to an email.

Repayments are an essential part of any payday loan, as they can either keep your loan cost manageable, by being flexible or cause credit to become unmanageable if it’s too rigid. Among other things, check if you can repay your payday loan early before you apply.

Image: Shutterstock

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