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Can you pay off your personal loan early?

You might be able to save on interest — but beware of prepayment penalties.

By choosing to pay off your loan early, you can often save a good chunk of money that would’ve been wasted on interest. However, some lenders charge steep prepayment penalties that may make early payoff an expensive prospect.

What are the benefits of paying off a personal loan early?

There are several benefits to paying off your personal loan early:

  • Save on interest. Beyond no longer having to budget for monthly payments, paying your loan off early will save you hundreds, sometimes thousands, of dollars in interest over the long run.
  • Access more cash. Without having to budget for your monthly repayments, you’ll have more money available each time your paycheck comes in.
  • Qualify for another loan. If you need to take out another loan, paying off your current loan early lowers your debt-to-income ratio, helping you qualify for more favorable rates and terms. Many lenders don’t allow you to have multiple loans at once.

Watch out for prepayment penalties

Choosing to pay your loan early will result in paying less interest over the life of the loan, but you may face steep prepayment penalties or exit fees if you aren’t careful when picking your loan terms.

Paying these charges may be worth it if your monthly payments are high and you can afford to pay the whole balance back at once. If you can’t, there are steps you can take to reduce the total amount you owe.

3 lenders that offer personal loans with no prepayment penalty

LendingClub Personal Loan

$40,000 9.57% to 35.99% fixed

“>-Be a US citizen or resident, Be at least 18 years old, Have a verifiable bank account

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SoFi Personal Loan Fixed Rate (with Autopay)

$100,000 8.99% to 25.81% (fixed)

Ages 18+, US citizen or permanent resident
Read review

Prosper Personal Loans

$50,000 6.99% to 35.99% (fixed)

640+ credit score, not a resident of iowa or west virginia”>640+ credit score, not a resident of iowa or west virginia”>18+ years old, a us citizen or permanent resident and have a 640+ credit score, not a resident of iowa or west virginia

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Compare more lenders

8 tips to pay off a personal loan faster

Personal loan payments can hang like a weight over your head. Choosing to tackle repayments head-on can save you time, money and stress — without having to sacrifice a huge part of your monthly income.

  1. Stash away the change. Find an app that allows you to round up the change from your purchases and put it toward savings. Once you’ve built up some capital, make an extra payment toward your loan. You may also want to consider opening an extra savings account so you won’t have to worry about not having enough in your checking account.
  2. Pay every two weeks. Making biweekly payments might feel like you’re just paying twice a month, but it actually adds up to 26 payments rather than the 24 you would have made paying twice a month. You’ll end up paying off your loan earlier without even realizing it.
  3. Round up payments. Round up your payments to the nearest $50 or even $100 to pay off more of your loan amount. And even if you can only manage a to throw $5 or $10 more each month, those few extra dollars can quickly add up — as long as you don’t have prepayment penalties.
  4. Look for discounts. Depending on your lender, you may be able to take advantage of discounts off your APR, even for something easy like enrolling in autopay or going paperless.
  5. Make more money without exhausting yourself. Sell your unwanted items through LetGo, eBay or even your local consignment shop. This can be a great way to make a little cash to put toward your loan.
  6. Squeeze in one big extra payment. If you get a raise or find yourself with more cash than you expected, consider putting it toward your loan. Things like your yearly bonus or an inheritance can be useful in lowering your debt. But reach out to your lender to make sure it’s all going toward your loan balance rather than interest.
  7. Check out refinancing. A series of on-time payments will improve your credit, and with an improved credit comes the opportunity to get a better interest rate. Consider refinancing your loan or consolidating your debt to lower your monthly payments.
  8. Cut expenses. Look at your monthly budget and find areas to cut back, even if it’s simply adjusting your thermostat or cutting cable. Read our guide to budgeting to find some more ideas.

Before you start applying any of these tips, make sure your lender allows you to make extra payments without additional charges and that you have enough extra income to cover what you’re spending.

Are there penalties for paying off my loan early?

It depends. Some lenders will penalize you for paying off your loan early as a way to make back a portion of the interest you would have paid if your loan had gone to term.

Prepayment penalties

Prepayment penalties or exit fees are usually included in the loan contract before you sign, so if you know you’re going to be paying early, avoid lenders that charge these.

Typically, a prepayment penalty is a percentage of the loan balance you’re paying off. So the sooner you pay off your loan early, the larger the penalty you pay. Lenders apply this so they don’t lose on the lost interest payments.

Precomputed or add-on interest

Since there are plenty of lenders that don’t have prepayment penalties, it’s in your best interest to also research ones that don’t precompute your interest. Also known as add-on interest, this is where lenders calculate the amount of interest you’ll pay over the life of your loan and add it to the principal.

It might seem convenient, but it will cost you more if you decide to pay your loan early. An interest refund will be given to you, although this still won’t be as cheap as finding a loan that accrues interest daily rather than including it all as one lump sum.

Why you should avoid add-on interest at all costs

When should I avoid paying off my loan early?

Paying off your debt could remove a weight from your shoulders, but it might not be the best choice. There are times when sticking it through to the end is beneficial.

  • Your lender charges a high early repayment penalty. Calculate the amount of money you’d save on interest against the prepayment penalty your lender charges. If it’s more than you’d save – or means you won’t save a lot – you may not want to pay off your loan early.
  • You don’t have a long credit history. Debt can be beneficial to new borrowers and those with less-than-perfect credit. Making regular monthly payments can help build your credit, which could score you lower rates on future debt.
  • You could add to your savings. Rather than paying off your loan early – especially if the monthly payments are affordable – you could place money into a savings account. This way, you’ll be earning interest and helping yourself avoid debt later on.
  • You could invest the money. Like adding to your savings, working with an investor to build your portfolio might help you earn more money than you’d save by paying off your debt early. It’s not guaranteed, but it could be something to look into.

Will paying off a loan early hurt my credit score?

It might. Once you pay off your personal loan, it will be considered a closed account on your credit report. If closing that account reduces the diversity of your credit portfolio or shortens your payment history, you may end up hurting your credit score even though you’re saving money on interest.

However, closing an account is inevitable. You won’t be paying off your loan forever, so consider what other accounts you have open. Make sure you have a healthy mix of open accounts and long payment history to offset the closure of your current personal loan.

Case study: Vincent compares his loan prepayment options

Vincent recently inherited a large sum of money and wants to pay off a few loans he’s taken out over the years, but he isn’t sure if paying them early will be worth the expense.

He creates a small chart to compare his outstanding loans and calculate the interest he’ll save.

Loan 1


5 years






Loan 2


3 years






Loan 3


7 years






Vincent decides it would be worth it to pay his first and last loan off early, but that he wouldn’t benefit from paying off the second since the amount he would save is so low. This opens up his finances so he can start investing the money he was previously spending on payments.

Why did my credit score drop after paying off debt?

Will my monthly payment be reduced if I make a partial payment?

It depends on the lender. Many will apply any extra money toward interest first, which might not reduce the monthly cost of your loans. Some will allow you to request how the partial payment is applied – opt for principal since this reduces the amount you owe and can lower your monthly payment.

It also depends on the amount of your partial payment. If it’s close to your monthly payment, you might see a small dip in the amount you owe each month. If it’s smaller, you might not see much of a difference at all, but it can still be beneficial in the long run.

Ask how your lender applies partial payments and if it can give you an adjusted payment schedule based on the amount of your partial payment.

Looking for another loan? Consider these options

If you’re in the market for a new loan to cover the next big project in your life, here’s a selection of lenders that may suit your needs.

1 – 6 of 6
Name Product Filter Values APR Min. credit score Loan amount
Best Egg personal loans
Finder Rating: 3.8 / 5: ★★★★★
Best Egg personal loans
8.99% to 35.99%
$2,000 to $50,000
Fast and easy personal loan application process. See options first without affecting your credit score.
LightStream personal loans
Finder Rating: 4.8 / 5: ★★★★★
LightStream personal loans
7.49% to 25.49%
Good to excellent credit
$5,000 to $100,000
Borrow up to $100,000 with low rates and no fees.
PenFed Credit Union personal loans
Finder Rating: 3.6 / 5: ★★★★★
PenFed Credit Union personal loans
7.99% to 17.99%
$600 to $50,000
With over 80 years of lending experience, this credit union offers personal loans for a variety of expenses.
Upstart personal loans
Finder Rating: 4.2 / 5: ★★★★★
Upstart personal loans
6.40% to 35.99%
$1,000 to $50,000
This service looks beyond your credit score to get you a competitive-rate personal loan.
Credible personal loans
Finder Rating: 4.3 / 5: ★★★★★
Credible personal loans
4.60% to 35.99%
Fair to excellent credit
$600 to $100,000
Get personalized prequalified rates in minutes and then choose an offer from a selection of top online lenders.
First Premier Lending
Not rated yet
First Premier Lending
5.99% to 35.99%
All credit types
$100 to $20,000
Short-Term Loans to Fit Your Needs

Bottom line

Making early prepayments on your loan can save you hundreds or even thousands of dollars in interest. There’s the risk of fees, but these can be avoided by comparing your loan options before you borrow. While you may not be able to make a huge prepayment to clear your outstanding balance all at once, there are small steps you can take to pay it down faster.

Frequently asked questions

If I pay off my personal loan early, do I pay less interest?

It depends on what type of interest your lender charges. If your lender charges precalculated or upfront interest, you won’t reduce how much you pay in interest. Otherwise, you will pay less in interest if you pay off your loan early.

Can I get charged a fee for making extra payments?

Depending on the lender, yes. Not all lenders allow you to make more than one payment per month. One idea to consider is increasing your monthly debits so that you can pay more while avoiding any fees for multiple payment processing.

What can I expect to pay if my lender charges prepayment fees?

Prepayment fees vary vastly among lenders. It could be a fixed fee, a percentage of the remaining interest on the loan or a combination of both. You’ll want to talk with your loan provider to find out what you’d have to pay, though many follow the Rule of 78 to calculate your payment.

How do I find out the details of my personal loan?

You should be able to find information about your loan in your online account portal. If there’s a specific piece of information you can’t find, contact your lender’s customer service team.

Where can I find a fast loan to pay off my bills?

If you need money fast, you might want to go with an online lender. These are typically faster than banks, credit unions or other brick-and-mortar lenders, and can often get you funds as soon as the next business day.

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4 Responses

    Default Gravatar
    DarleneSeptember 28, 2018

    Where can I find what my balance is on my Best Egg Loan?

      johnbasanesSeptember 28, 2018Finder

      Hi Darlene,

      Thank you for leaving a question.

      For you to check the balance on your Best Egg Loan, you may directly call the company at +1 855-282-6353 between Monday–Thursday 8am–11pm ET, Friday 8am–8pm ET and Saturday 9am–1pm ET. Hope this helps!


    Default Gravatar
    JoeMarch 14, 2018

    I have a best egg loan,want to know if I make extra payments,if it will go towards the principle…thanks

      JoshuaMarch 21, 2018Finder

      Hi Joe,

      Thanks for getting in touch with finder.

      Generally speaking, unless stipulated, when you make extra repayments to your loan, the majority of it goes to the interest and only a portion of the principal. There is a way to get around this. For example, you can pay your extra payments at the same time that you make your monthly payment. This way the money will go towards the principal.

      Of course, let me be clear that every lender has their own way of handling debts. That’s why it is wise to read the terms and conditions of your loan or directly get in touch with your lender to see how you can pay off your debt sooner.

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!


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