Your First Payment and How Autopay Works

Find the first due date

Regulation Z requires the disclosure to show the number, amounts and timing of the payments that repay the loan. The first line of that schedule is your first due date. Many lenders set it about a month after the loan funds, but the schedule is what binds you, not a rule of thumb.

1. 1 Find the payment schedule in the disclosure you signed and note the first date and amount.
2. 2 Log in to the lender's portal once the loan funds and check that the date and amount match.
3. 3 Compare the date with your payday. If it falls just before income arrives, ask the lender whether it will move the due date before the first payment, not after a missed one.
4. 4 Set a reminder a few days ahead, even if you plan to use autopay, for the first two or three months.

The first payment can differ from the rest. Some lenders charge the extra days of interest when the first period runs longer than a month, and the disclosure will show a different first amount when they do.

How interest builds on a simple-interest loan

Many personal installment loans charge simple interest: each payment first covers the interest that built up on the balance since the last one, and the rest reduces the balance. Some lenders figure that interest by the month, others by the day. The worked example below, not an offer, uses the site's sample loan: $10,000 at 14% for 36 months, with a payment of $341.78.

On the daily method, this loan builds about $3.84 of interest each day at the start. Paying 10 days late adds about $38 of interest to that payment, on top of any late fee, and leaves a little more balance for later months. Paying a few days early has the opposite effect. To see what extra payments save, try the extra payment calculator.

Setting up autopay

Autopay is a preauthorized electronic fund transfer: you give the lender standing permission to debit your bank account on each due date. Regulation E says that permission must be in a writing you sign or similarly authenticate, such as an online form, and the lender must give you a copy.

• Pick the account where your income lands, so the money is there on the due date.
• Check the debit date the lender will use; some debit on the due date, others a day or two before.
• Keep the authorization copy. It shows what you agreed to and is useful if you later revoke it.
• Ask about a rate discount. Some lenders lower the rate for autopay; autopay and rate discounts explains how to value one.

Stopping or changing autopay

You can stop a scheduled debit through your bank. Regulation E requires the bank to honor a stop-payment request, by phone or in writing, made at least three business days before the transfer. If you call, the bank may ask you to confirm in writing within 14 days. Banks generally charge a fee for a stop payment order.

1. 1 Tell the lender first that you are revoking the autopay authorization, by phone and then by letter or email, and say how you will pay instead.
2. 2 Tell your bank that you revoked the authorization. Once the bank knows, it must block further debits from that lender and may not wait for the lender to stop them.
3. 3 Pay the next installment another way, such as a one-time online payment, before the due date.
4. 4 Watch your statements and report any debit you did not allow to the bank right away.

Ending autopay does not end the loan. The Consumer Financial Protection Bureau puts it plainly: cancelling an automatic payment does not cancel what you owe. If you stop autopay to keep money for rent or food, call the lender about a payment arrangement at the same time.

Grace periods and late fees

The disclosure lists any charge for a late payment, and the agreement says how many days after the due date it applies. That gap is the grace period, if the loan has one; it is set by the contract within the limits of your state's law. A payment that bounces can add a returned-payment fee as well, and an autopay debit from an empty account can also bring an overdraft or returned-item fee from your bank.

Read how your loan handles both in late fees and returned payments, and see what your state allows on the state rules pages. If you know you will be short, contact the lender before the due date; options are usually wider before a payment is missed than after.

Questions people ask