Can You Pay Back Your Loan Early?
You can always pay a loan back early
, and in almost every case you are encouraged to do so. Paying back a secured loan early means less interest for you and a shorter loan term, which ultimately means more money you save over time.
There are some loans, however, that have penalties for paying your loan back early. In general, we at SecuredLoansCompared.com
try to find you lenders with no early payment fees, but if you happen upon a lender that does have early payment fees in the fine print, you will want to calculate the amount of that penalty before you decide if you are going to pay back the loan early. With Penalties
The penalties are often based off your interest rate. If you are nearing the end of your loan, it may not be worth it to pay the loan off early if the fees are greater than the amount of money you save over time. If you make large payments early, however, before much interest has accrued, then you save more in interest over time making these large early payments worth the penalties. Without Penalties
Without penalties, however, paying off your loan early - as well as making larger loan payments - is a great way to reduce the amount of interest you are going to be paying on a loan over time. Without penalties there are no downsides, but remember that this does not always reduce the amount of your monthly loan payments, so before you pay back your loans early, make sure you are not using money that you may one day need to pay back the loan in an emergency.
Otherwise, if you have the extra money, making larger payments to pay back the loan early on a no-penalty loan has no downsides and if you can pay it off early, it is good for both your wallet and your credit in the future.
Most importantly, some loans may have you locked into paying a fixed interest rate over the period of the loan. In the somewhat unlikely event that the loan rate is very low, and interest rates have risen above the loan rate, and you might be able to earn more interest with a bank, than you are paying on your outstanding loan. In this case, it is not worth paying back the loan early.