Yes, you can pay off a secured loan early, but you may get early repayment fees for doing this. The early repayment fee could be equivalent to 1-2 months’ interest, however, even with these fees you might still save money on the overall interest accrued.
Paying off a secured loan early is a great option for some, but it’s not the best option for every secured loan borrower. You should always check the terms and conditions of your loan and figure out the true cost of the loan should you pay it back early compared to paying it back on the original loan repayment date.
Why Might You Want to Repay a Secured Loan Early?
There are a number of reasons why you might want to repay a secured loan early, including the potential money saved on the total cost of the loan.
You might also need the loan to be paid off early because you’re moving into a new house or need to borrow more. Whatever your reason for wanting to pay the loan off early, it’s best to first assess the options available to you before making an informed decision.
If you’re looking to move house, you might think that paying off your secured loan early is the only option, but this isn’t strictly true – some lenders are open to transferring the remainder of your secured loan onto the new property you’re looking to move into. Transferring your secured loan in this way will be subject to the equity held in the new property and your affordability.
Is It Cheaper to Pay Off a Secured Loan Early?
It can be cheaper to pay off a secured loan early, however this isn’t always the case, especially when early repayment fees come into play.
The cost of paying off a secured loan early will depend on the unique details of your borrowing agreement. Lenders may charge an early repayment fee for borrowers wanting to pay their loan back early, which could be the equivalent of a couple months’ interest. This early repayment fee can increase the cost of the loan, and might make it not worth paying back early.
Your lender should make it clear what would be required to pay the loan back early. If you’re unsure, check the terms and conditions of your loan, or discuss this with the lender.
How Do You Pay Off a Loan Early?
To pay off a loan early, you’ll have to call up your lender to discuss this option. Be sure to ask about any and all fees that will be charged for paying back the loan early, so that you’ll be able to determine the true cost of the loan.
Once you’ve discussed this all with the lender, they’ll provide you with a figure you’ll need to pay, and a timescale in which to pay it. Once this has happened and you want to go through with the early repayment, all that’s left to do is pay within the allotted time frame.
How Much Can You Save Paying Off Your Loan Early?
The amount of money you could potentially save by paying your loan back early will depend upon several factors but could be in the hundreds and even thousands. Factors that can affect how much include:
- The length of time you have left on the loan term
- The original loan size
- The loan’s interest rate
If you have a considerably low interest rate and only a couple of repayments left to make, paying back early probably won’t save you too much, if anything at all. However, you might save thousands of pounds if you have a large loan and high interest rates and decide to pay back the loan years before the agreed repayment date.
To discuss your secured loan requirements today, speak to Lending Expert today for a free and impartial quote >>