You can always repay a personal loan early. However, some lenders will charge a significant fee for exiting your loan agreement early. Plenti has no early repayment fees on consumer personal, auto and renewable energy loans.
Paying off your personal loan early is a commendable goal. The sooner you’re out of debt, the better, right?
Well, maybe.
Some lenders will sting you with an early repayment fee if you manage to pay your personal loan off ahead of schedule. Early repayment fees can range from $0 -$800.
The whole story.
It might seem rough that you’re charged for your financial diligence, but there is a method in the madness. Early repayment fees are designed to cover the lender’s loss incurred if you end your loan early.
To fully understand why these fees are sometimes imposed, it helps to know the backstory of your loan (cue flashback music):
- Your personal loan is approved
- Your lender borrows money in order to provide your loan
- Your lender uses the interest you pay on YOUR loan in order to make payments on THEIR loan
- You choose to repay your loan early
- Your lender charges an early repayment fee to cover their losses caused by the interest you will no longer be paying
To fee or not to fee?
That’s a good question! It’s worth doing the sums to figure out whether you’re better off suffering the dreaded early repayment fee in order to finish your loan early. You may still be ahead of the game by reducing the amount of interest you’ll pay over the long term.
The fee is usually calculated by looking at the remaining loan balance and loan term. For example, fixed rate personal loans often charge an “economic cost” or “fixed cost” for repaying a loan earlier than expected.
If you’re feeling unsure, call your lender to discuss the early repayment fee so that you know exactly how much you’ll be expected to pay
The good news.
This is one fee you can avoid.
Seek out a lender who doesn’t charge an early repayment fee so you’re not penalised for your financial diligence.
At Plenti, we believe in tailoring personal loans to suit your unique financial situation and lifestyle. This means rewarding your strong credit history with attractive rates that are personalised to you and offering the flexibility to pay it back faster. In fact, we’ll never charge you fees or penalties for paying your loan back early.
This means you can increase your scheduled monthly repayment, make an extra payment, or pay off the loan in full at any time without being stung for extra charges.
It’s your life – you’re in control.
FAQs
In fact, we'll never charge you fees or penalties for paying your loan back early. This means you can increase your scheduled monthly repayment, make an extra payment, or pay off the loan in full at any time without being stung for extra charges. It's your life – you're in control.
Is it worth paying off a personal loan early? ›
Pros of Paying Off a Personal Loan Early
With loan payments out of the way, you free up money to pad your monthly budget. You may have more funds to direct to another financial goal, such as investing, saving for a down payment or just having more "fun money," Nitzsche says.
What is the penalty for paying off a personal loan early? ›
Interest-based: The lender charges a specific time period's worth of interest—say, 12 months' worth—if you pay off your loan early. Percentage of balance: Some lenders assess a percentage of your remaining loan balance, such as 1% or 2%, as a prepayment penalty.
Can you pay out a personal loan early? ›
When choosing a fixed rate loan you need to know that if you: repay the loan early, either in full or in part, or • switch to variable interest rate before the end of the fixed rate term, early repayment charges may apply. Early repayment costs can be very large and may vary in size from day to day.
Can a personal loan be paid off early? ›
Typically, if there is no prepayment fee imposed by the lender you will benefit by repaying your loan sooner. Even if this clause is in place, you could still save some money. It would all depend on what the penalty fees are and how much of the loan you have left.
Do banks like it when you pay off loans early? ›
However, some lenders may charge a prepayment penalty fee for paying the loan off early. The prepayment penalty might be calculated as a percentage of your loan balance, or as an amount that reflects how much the lender would lose in interest if you repay the balance before the end of the loan term.
Will my credit score drop if I pay off a personal loan? ›
Paying off an installment loan entirely can affect your credit score because of factors like your total debt, credit mix and payment history. The benefits to paying off a personal loan include reducing your debt-to-income (DTI) ratio and saving on interest over the course of the loan.
What are the three most common mistakes people make when using a personal loan? ›
Avoid These 6 Common Personal Loan Mistakes
- Not checking your credit first.
- Not getting prequalified.
- Not shopping around for loan.
- Taking out a larger loan than you need.
- Miscalculating fees and other charges.
- Falling behind on payments.
The benefits of prepaying a loan include: Interest savings: By eliminating future interest charges, you can significantly reduce the total interest paid. Enhanced credit score: Early repayment has the potential to positively influence your credit score.
Can I pay off my personal loan in full? ›
Paying off your loan early can save you hundreds — if not thousands — of dollars worth of interest over the life of the loan. Some lenders may charge a prepayment penalty of up to 2% of the loan's outstanding balance if you decide to pay off your loan ahead of schedule.
If you pay off your loan early, it means the lender will receive less money in interest. Early repayment charges are there to cover some of the interest you would've paid in months to come, if you continued with the full length of the agreement.
Can you take out a personal loan and pay it back immediately? ›
Can you Take Out a Loan and Pay It Back Immediately? You can take out a loan and pay it back immediately, but you can still incur costs. For example, many personal loans charge upfront origination fees that are automatically deducted from the loan proceeds. There are also potential prepayment penalties.
How can I pay off my personal loan faster? ›
How to Pay Off a Personal Loan Faster
- Paying more than the minimum due each month.
- Adjusting your budget and making extra payments toward your loan each month.
- Finding new ways to cut costs and save money.
- Increasing your income by finding a new job, taking extra shifts or finding a side hustle.
A personal loan may lower the total age of your accounts and increase the amount owed portion of your credit – both of which can lower your score.
Is it good to prepay a personal loan? ›
Prepayment of an ongoing personal loan does not have an immediate effect on your credit rating, but in the long run a full prepayment effectively is successfully closing a loan account, which does shore up your credit rating.
What are the rules for prepayment of personal loan? ›
Borrowers may be allowed to foreclose or prepay their loan 6 months after the date it has been disbursed, without any prepayment penalty. A charge of 2.5% + GST will be levied on any prepayment amount that is over 25% of the principal due. Part prepayment can only be done once in a year.
Is it a good idea to prepay personal loan? ›
Reduction in overall interest cost: By prepaying a personal loan, you can reduce the overall interest cost of the loan, as the unpaid interest component decreases. 2. Shorter loan tenure: Prepayment can reduce the loan tenure as it will bring down the outstanding principal amount.
Will my credit score go up if I pay off a loan? ›
While paying off your debts often helps improve your credit scores, this isn't always the case. It's possible that you could see your credit scores drop after fulfilling your payment obligations on a loan or credit card debt. However, that doesn't mean you should ignore what you owe.
What is the benefit of closing personal loan early? ›
A complete Personal Loan preclosure allows you to enjoy a reduced interest cost and relieves your debt burden. However, it could cost heavily since you must pay a lump sum from your pocket. Rather than preclosing the loan, you can invest it in a lucrative avenue to accumulate returns and recover the interest cost.
Is it better to pay off loan early or late? ›
Paying off a loan early could save you money in the long term as it can reduce the total amount you need to repay. Bear in mind that you need to account for any early repayment charges to help decide if it's the right choice for you.
