Looking for another loan? Consider these options
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 cashadvanceamerica.net/loans/loans-for-self-employed out over the years, but he isn’t sure if paying them early will be worth the expense.
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.
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.
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.
We update our data regularly, but information can change between updates. Confirm details with the provider you’re interested in before making a decision.
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.