The bad news is that you have debts, but the good news is that you have a little extra cash on hand. But here comes the doubt: is it better to pay your loans early or just keep making your normal monthly payments?
To make the right decision, it is important to evaluate what you get out of a loan in relation to the cost of keeping it. You may even save a bit if you eliminate debt early, but it is not always the best thing to do.
To help you decide, let’s discuss some of the payments and the possibilities of repaying the loan in advance! See also:
Why pay the loan in advance?
The best reason to prepay a loan is to save money and stop paying interest. Interest actually does not buy you anything, except the ability to have access to a high amount and be able to pay slowly.
Some loans can drag on for 30 years or more, and interest costs certainly add up over time. Others, such as online personal loan, may be short-term, but high interest rates may end up weighing. With high-cost debt (like most credit cards), there’s no question: paying the least is a bad idea.
And why not pay…?
However, the economy does not always pay off the loan in advance. That’s because when you pay early debt, you can not use that extra money. This can mean that you enjoy less luxuries in your monthly budget, or you end up with a smaller reserve (making it harder to pay for “surprises” expenses).
In addition, you pay a cost of opportunity: you will have to find additional money to put toward other goals (retirement or down payment in a home, for example).
And once you pay off debts, you get stronger financially. Let’s explain: The credit score is the score that you have in front of the financial market and what many banks and financiers evaluate when giving services to you. The more debt you get and pay on time, the better your score will be. And as you take out your loan, the stronger you get.
But then, what to do?
Some people hate debt. They repay the loans as quickly as possible – even if it does not make the best financial sense. It’s okay as long as you know why you’re doing this.
You can not put a price on happiness. Maybe you want to eliminate debt before you retire, or you’re tired of making monthly payments, and then repaying the loan in advance is even the best option.
Now that you know what happens when you repay your loans in advance, you will probably be ready to make a decision. If so, call or email your lender and ask how to do so that your payments are properly credited to your account and so you know exactly how much you can save.
If you want to pay the advance loan here, for example, you can log in to the customer area, generate a ticket with the date on which you want to make the payment and normally discharge it at any bank.