Installment loans can help you when you are in a pinch, but you must pay them off eventually. Although some people are struggling just to meet the fixed payments, others may be looking for a way to slash that extra payment from their monthly budget as soon as possible.
That leaves many Americans to wonder if installment loans can be paid off early. Technically, all installment loans can be paid off early, but some lenders discourage their clients from doing so by handing out early payment penalties. Here at Simple Fast Loans, however, we do not charge any early payment penalties and encourage clients to pay off their installment loans early.
To learn more about installment loans and paying them off early with Simple Fast Loans, read on.
Before learning how to pay off your installment loan early, it is important to understand what an installment loan is.
With an installment loan, you will borrow a set amount of money at once. After borrowing the money, you repay your loan over a series of fixed payments or installments, hence the name.
Even if you have never heard the term before, you are likely familiar with installment loans. After all, auto loans, mortgages, and student loans are all forms of installment loans.
Installment loans are beneficial for several reasons. Especially in comparison to other short-term loans, installment loans can be advantageous depending on your circumstance.
The biggest benefit of an installment loan is that you can get the money fast. In the case of an emergency, you might not be able to pay out of pocket. Instead, you need a loan that can pay the emergency fast and with little hassle.
Installment loans are one of the best loan types for this purpose. Not only are the applications fast, but the act of receiving your money is fast too.
Predictable payments are always better than unpredictable ones. When a payment is predictable, you can easily factor it into your budget and know whether you can afford it. Installment loans are highly predictable, so predictable, in fact, that you will know how much you need to pay off every month.
Many people feel overwhelmed, trapped, and crippled by their debt since they don’t see its end. With an installment loan, you know exactly when payments are due and when the loan needs to be paid off. This structure allows you to see the light at the end of the tunnel, even when it is only your first installment.
Technically speaking, all installment loans can be paid off early, but some people are discouraged from doing so, whereas others simply don’t want to. If you cannot pay your loan off early, that is perfectly fine. However, you might want to seize the opportunity to pay off your loan sooner rather than later if able.
Even though you can pay off your installment loan early does not mean you should. Many lenders charge early payment penalties for paying off your loans sooner than the installment date. Although this sounds backward, it makes sense from the lender’s perspective.
A lender makes money by the interest that grows on the loan. If you pay off your installment loan earlier than expected, the lender won’t make as large of a profit since there was less time for the interest to grow.
Because of this fact, many lenders charge early payment penalties to either make up some of that difference or discourage their clients from paying off their loans in the first place.
What this means for many people who get installment loans is that they end up being charged the same price, even if they work hard to pay off the loan sooner than the last installment date.
Luckily, there are ways that you can avoid paying early payment penalties when paying off your installment loan early. The easiest way is to only get loans from lenders who do not charge fees and penalties for paying the loan off early.
Simple Fast Loans never charges early payment penalties. We encourage you to pay off your loan as soon as you can. That way, you can start saving or spending your money how you want instead of being a slave to your debt.
Paying off an installment loan early is like a breath of fresh air. It comes with two major benefits: more financial freedom and a better credit score. Of course, both of these benefits apply even when you are charged an early payment penalty, but the benefits are even sweeter when no penalty is applied. Another benefit is saved money when the lender does not charge any fees!
Whenever you are paying off your installment loan, it can sometimes feel like you can’t do what you want with your money. Instead, you must pay off the installment every month until the loan is completely paid off.
When this happens, you will immediately experience more financial freedom because a chunk of your money every month is not automatically going to your loans. Instead, you can save it, use it to pay off another loan, or even treat yourself.
No matter what you choose to do with the money you now have, you will experience more financial freedom.
If you pay off your installment loan early, you show future investors or lenders that you are responsible with your money and pay off any loans you take. As a result, your credit score doesn’t get any worse since you are acting responsibly.
Even if you get an early payment penalty, it will not hurt your credit score. This penalty does not affect your credit score in any way.
That being said, don’t assume that paying off your installment loan at one time results in a better score than paying your installments as originally agreed to. As odd as it may sound, consistently paying off a bill or a loan positively impacts your credit score more than paying off the loan at one time.
Still, paying off the loan sooner is better than later when it comes to the due date. So, be happy that an early payment doesn’t hurt your credit score and ensures you aren’t penalized for late payments.
One last potential benefit of paying off your installment loan early is that you get to save money. This benefit only applies when you get your loan from a lender like Simple Fast Loans who does not charge any early payment penalties.
By paying off the loan early and not receiving any penalties, you don’t have to pay as much interest as you were originally anticipating. As a result, you end up saving money in the process. The saved money ties directly into the financial freedom benefit we mentioned above.
If you are interested in paying off your installment loans early, here are some things you can do to accomplish your goal:
Although this may sound obvious, create a budget specific for paying off the loan sooner rather than later. Even if you already have a budget, take the time to reassess it to see if your current budget meets your goal of paying off the loan early.
Whenever you are creating or reassessing your budget, try to round up to the nearest $10 or $50. Any time you do not max out your allotted budget, use the excess to pay off your loan.
For example, let’s say that you have a car budget of $300 a month. This month, you only spend $250 on your car. Put that excess $50 towards paying off your installment loan. That way, you’re paying off your loan quicker without changing any of your habits.
Another obvious tip is to cut down on excess spending. When creating or updating your budget, see if there are any areas you spend too much on. Even drinking Starbucks two days less than before can make a big difference over months. Cutting down on your excess spending gives you more money to pay towards the loan.
Many people do not know that they can pay off their loans biweekly instead of monthly. When you make payments biweekly, you get to double the number of payments you make, essentially allowing you to cut your payment period in half. At the same time, paying biweekly reduces interest on the payment.
Even though paying off your installment loan early may sound great, it is not right for everyone. It is important to thoroughly assess your own financial security before making the decision to pay off the loan early.
Here are some things to avoid when paying off your installment loan early to ensure you are making savvy financial decisions:
Even though we recommend cutting your spending when you can, don’t neglect your needs. In other words, make sure you are still paying your rent and utility bill, as well as getting healthy and nutritious food. The same goes for medicine. Installment loans only last a short period of time, but your health and well-being stay with you the rest of your life.
Don’t neglect your savings either. Even though it may be tempting to pay off your loan using the money that is typically allotted to your savings account, don’t do it. Savings are important in the long run, and they accrue the type of interest you want.
Continue to save money and invest in your future and retirement even when you’re paying off loans. This may be difficult at first, but your future self will thank you.
At the end of the day, if you cannot pay off your installment loan early, don’t beat yourself up over it. The installment loan is designed so that you can pay it off exactly as expected. If you do not have the financial security to pay off the loan early, then don’t.
What’s most important is your health and well-being. You do not want your installment loan to make your life more difficult. So, be patient with yourself while you are paying off your installment loan, no matter how fast or slow you are paying it off.
No. Simple Fast Loans does not charge any early payment penalties and encourages clients to pay off payments as soon as they are able for enhanced financial freedom.
You can apply for installment loans at Simple Fast Loans by filling out a fast application form online. You will need to disclose information about your identity and finances. Make sure you have your name, email address, phone, social security number, and financial information on hand.
If you have an installment loan, it is totally within your rights to pay off the loan fast. However, some lenders charge early payment penalties to discourage you from doing so.
To get on track for paying your installment loan off early, create a budget, round up, cut down on spending, and make payments biweekly. At the same time, don’t neglect yourself or be too hard on yourself in the process.