Can I Repay A Personal Loan Early?

Overview

• Can You Pay Off Loans Ahead Of Schedule? 
• How Personal Loans Work: Understanding The Terms, Interest and Repayments
• The Benefits And Drawbacks Of Making Extra Repayments
• Fees, Charges and Conditions To Check First
• Will Early Repayment Actually Save You Money?
• Practical Steps To Take Before Paying Out Your Loan
• Make The Right Choice For Your Personal Loan And Financial Situation
• FAQ

The short answer is, yes, you can. Most lenders will certainly allow you to pay off your personal loan early, but not every lender will treat early repayments the same way. One lender may charge you an early repayment fee if you pay off your loan with more than a month left of your loan term, while another may restrict the number of extra repayments you can make within a year.

Red Tree Finance doesn’t impose any limitations or early repayment penalties. You can make extra payments to your balance without early exit fees, potentially saving you money over the term of the loan.

No matter what you do, before you make any extra repayments to your loan, it always pays to check your loan contract for the fine print and ensure your lender confirms your payout figure in writing.

Before you commit to paying your personal loan ahead of time, it is important to really understand how cash loans work. 

A personal loan isn’t just a lump sum of money deposited into your account – it’s an agreement with your lender to repay the full amount plus interest, through scheduled payments by a set date.  

Beyond the loan funds, several factors add to the total amount you pay back. They include the interest rate and any additional fees and charges incorporated into the loan product. You typically make your repayments weekly, fortnightly or monthly, with the lender confirming the repayment schedule and loan term upfront. That way, you know precisely when you will pay your loan off in full.

While the benefits of making extra repayments to your loan may be appealing, it’s important to weigh up both the benefits and any potential downsides before deciding.

The Pros of Early and Extra Repayments

Early repayments give you the benefits of:

• Reducing the total interest you pay over the life of the loan. 
• Clearing your debt sooner so you can focus on other financial goals.
• Freeing up additional funds in your household budget once you’ve cleared your debt.

The Cons Of Early Loan Repayment

For some borrowers, early repayments may present certain drawbacks that might include:

• Committing too much cash to one repayment could leave you with little or no emergency funds. 
• Ignoring more urgent debts that may require more immediate attention. 
• Some lenders may also apply early exit fees to loans paid off before the set term end date. 

Thankfully, Red Tree Finance borrowers need not worry about penalties for early repayments on our secured loans. Whether you’re borrowing $2250 or the maximum $5000, you can pay off the loan as soon as you like without added charges. 

Fees, Charges and Conditions To Check First

Though Red Tree Finance doesn’t charge you to repay your personal loan early, it is certainly worth knowing the possible additional fees you may incur with other lenders.

As you sign your loan contract, look over it to see whether your lender has built in an early repayment fee or a discharge fee should you choose to pay off the debt early. That charge may still apply, even if you’re just a few months from the end of your loan term. 

The Standard Fees To Be Aware Of

When you apply for a personal loan, the advertised interest rate doesn’t always provide the full story. The comparison rate gives a more accurate picture of the total cost of your loan.  It takes into account the fees and charges you will pay (e.g. establishment fees, monthly fees) as well as the advertised interest rate. You may also be subject to dishonour fees for missed or late payments. 

Red Tree Finance outlines all of our rates and fees as part of our commitment to responsible lending and the National Consumer Credit Protection Act 2009.

To determine whether repaying your personal loan early will save you money, you’ll need some figures to work with. 

As a hypothetical example, imagine a $3000 loan with a loan term of 12 months. By increasing your fortnightly repayments by 50%, or making occasional additional repayments outside of your normal payments, you can lower your balance quicker and pay less interest over the life of your loan.

Before you consider altering your loan repayments, it’s worth stopping for a moment and taking a holistic look at your existing financial situation. 

Important Points To Consider

• Always read your loan contract and pay particular attention to any conditions around repaying your loan early. 
• Get written confirmation of your payout figure in writing and make sure you know how long that figure is valid for. 
• Before you make extra repayments, make sure you can comfortably manage your finances without relying on that extra money in your budget. 
• Consider paying off debts with the highest interest rates first to save money and reduce your financial burden faster.

For some borrowers, a debt consolidation loan like those offered by Red Tree Finance can provide a more streamlined and structured approach that may offer greater value in the long run. 

Make The Right Choice For Your Personal Loan And Financial Situation

Though repaying a personal loan early can be a smart and financially responsible move for many borrowers, it pays to completely understand the terms and conditions (as well as the potential costs) involved. 

Red Tree Finance offers cash loans up to $5000 with no penalties for early repayment. That means you can book that overseas holiday or pay your vet bills with ease and repay the loan faster without any added financial strain. 

No matter what your financial goals are, we’re here to help.

Is it wise to pay off a personal loan early?

Paying off a loan ahead of time offers many benefits, from paying less interest on your loan to reducing the overall loan term. However, if making additional repayments on your loan puts you in a difficult financial situation, the drawbacks may outweigh the benefits. 

What happens if I pay off a personal loan early? 

With Red Tree Finance, you won’t be charged any fees for paying off your online loan ahead of your set term end date. However, other lenders may charge you an early exit fee. It’s best to check the terms and conditions in your loan contract to be sure.

Will paying off my loan early hurt my credit score? 

Generally, paying off your loan early won’t hurt your credit score in the long term. However, you may see a slight temporary dip in your rating as finalising a personal loan reduces the number of elements in your credit mix and also changes the average age of your accounts. What may negatively impact your credit rating is late or missed loan repayments.

The information provided in this blog is of a general nature and is provided without considering your specific objectives, financial situation, or needs. It is intended for informational purposes only and should not be relied upon as financial, investment, or other professional advice.Before making any financial decisions or taking action based on the information presented, you are strongly encouraged to assess its appropriateness in light of your individual circumstances. Red Tree Finance does not intend to provide personalised financial advice, and you should seek independent financial, legal, tax, and other relevant advice tailored to your unique situation.