Repaying Your Loans Early Is So Important

Pennygem

If you’re in a good place financially and only have a little bit left on your personal loans, it can be tempting to want to clear the balance and move on.

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00:00 If you're in a good place financially and only have a little bit left on your personal

00:07 loans, it can be tempting to want to clear the balance and move on.

00:11 First things first, make sure you're as financially prepared as you think you are.

00:15 That means checking your budget to make sure you can still pay off your credit card bills

00:19 as well as having enough savings set aside in case of a financial emergency, without

00:24 dipping into your retirement fund.

00:26 That said, without taking money out, if you want to allocate the next few months of contributions

00:30 to pay off the loans, that's okay.

00:32 The biggest thing is that paying off your loans early may actually cost you.

00:36 NerdWallet says few lenders still charge prepayment fees, but you should check.

00:40 But you can do the math to see if that fee is cheaper than the interest you'd end up

00:44 paying but letting it play out longer.

00:46 If that's the case, Bankrate suggests putting the money in an interest-bearing account while

00:50 you continue paying monthly.

00:52 And if you decide it's the right move, there are all kinds of ways you can shorten the

00:56 loan period without paying a lump sum, like paying over the minimum each month, making

01:01 loans every other week instead of once a month, or using a lender payment program, though

01:06 those might come with fees.

01:07 you

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