Can You Repay a Loan Early?

Dollar bills

Much of the time, yes, borrowers have the option of paying off their loan early if they wish. However, in addition to asking “Can you repay a loan early?” it’s important to also ask “Should you repay a loan early?” While certainly no one would scoff at your good intentions of wanting to pay off a debt, it might actually be more expensive in the long-run if you repay your loan early. Some lenders charge a hefty penalty fee for repaying loans early, in which case it would be more advantageous to continue making your regular monthly payments. Learn more about what to consider before repaying your loan early with the team at Xpress Cash, below.

Loss of Tax Advantages

Some loans come with tax advantages that you would lose if you were to repay early. If your interest paid is tax deductible, you should speak with a tax advisor about what the ramifications of paying off your loan early would be before you do so. If you discover that the tax savings outweigh what you would save on interest by repaying the loan early, you may want to just continue with your monthly payments.

Personal Savings Implications

The answer to “Can you repay a personal loan early?” may be yes, but another factor you should consider before you do is your personal savings. If you repay your loan early, would it require you to dip into the money you have set aside for emergencies? If so, you probably want to rethink your decision. An emergency can happen at any time, and it’s better to have your savings available so you don’t have to rely on using credit cards or taking out another loan to pay for it. 

Penalty Fees

As we noted above, some lenders charge a penalty fee to borrowers who repay their loan early. If the cost of the penalty fee outweighs what you could save on interest, your finances would be better served by continuing with your regular monthly payments. 

There are two simple ways to check if your loan agreement has a prepayment penalty:

  1. Revisit the original loan documents you signed to find out if there is a fee to be paid when you repay the loan early. You may need to read into the fine print to find this information.
  2. Contact your lender to ask if there will be a penalty if you repay your loan early.

Learn More with Xpress Cash!

Whether you’re asking “Can you repay a personal loan early?” or any other type of loan, the answer is often yes. But as you learned today, the answer may be more complicated depending on a few factors. If you have any lingering questions about the topic, the team at Xpress Cash is happy to help! Contact us online or visit us at one of our Michigan locations to continue the discussion with one of our friendly associates.