Personal Loans Early Payoff

Personal Loans Early Payoff

During this time in year, January to March, we get quite a few customers asking for 10 day payoff quotes.  As people start to receive their income tax refunds, they attempt to pay their Personal Loans in full.  At first this may seem like a great idea.  But, what we witness quite often is that, in the long run, it does not give the desired result of not staying in debt.  Here are some points to consider if you are planning to use a large chunk of your tax refunds to pay on a large debt.

Early Payoff – Pros  – Save On Interest

One benefit of paying a Personal Loan in full early is that you s

ave on interest.  The loans through America’s Loan Company are amortized.  So, every payment over the term of our Bad Credit Loans carries a portion towards principal and interest.  Most of the interest is paid at the beginning of the loan.  Therefore, the earlier a loan is paid off the more one saves on interest.

Early Payoff – Pros  – Get Rid Of Monthly Burden

Another benefit of paying a Bad Credit Loan in full early is the freedom of not having that debt.  Not having to spend $100.00 a month on a debt, for instance, is $100.00 a month that could be put in a savings account or used towards emergencies.  Less debt allows more breathing room financially, if one is disciplined enough to engage in saving money. in an account.

Early Payoff – Cons – Leaving Yourself Too Short

But, paying off a Personal Loan early can result in having to borrow again a few short months down the road.  It is no unusual for customers to leave themselves too short in “emergency funds” after paying a debt in full early.  So, there may be enjoyment in not having to pay on a debt for a few months.  However, when another unexpected expense occurs, like car or house repairs etc., one may find himself with little in the “emergency fund” coffers.  This results in having to borrow more funds.

Early Payoff – Our suggestion

Our suggestion is to make sure you have an adequate amount of “emergency funds” in a bank account or under your bed.  Take a deep breath and start cranking down some numbers.  Figure out based on past years how much money would be adequate to have for emergencies.  That may mean that you can’t payoff a debt in full right away.  But you can start making extra payments.  This by itself should save you money on the interest in the end.  For instance, if the payoff on a Personal Loan is $4000.00, paying just $2000 will shorten the term of your debt and save on interest.  Also paying a little extra with each payment should have the same result.  A more measured approach to paying a debt in full, with a little patience, in our opinion, may reduce the need borrow more money sooner as compared to later.

Early Payoff or Not, We Appreciate Our Customers

Don’t get us wrong.  America’s Loan Company welcomes the opportunity to help Ohio residents with any Personal Loan needs.  Our point here is that making a big payoff payment on a Personal Loan may be counter productive.   It may be better to make extra payments little by little.  Thank you for choosing us as your lender.

2/27/18