There are two questions that most people ask when considering a debt consolidation loan and one of them is, “Do I pay off my loan early?” The answer to this question depends on several factors. If I can manage my debt without outside help I will probably not have any problem paying the full amount each month. The more assistance I can get the better off I will be.
When I am thinking about consolidating my debt I think about how much it would cost to pay off all the credit card companies. This is especially true if I have a high interest rate credit card. So if I am able to consolidate my loans and take out a low rate personal loan to do it, then do I pay back early? If I have a decent credit score and a relatively low interest rate then the answer to this question is most likely no. You will usually pay less in interest if you pay back your loan earlier rather than later. This makes it in your best interest to consolidate sooner rather than later.
Think about what your other options are. If you need a loan with a long payback term then it may be worth taking out a secured loan, but this is only a viable option if you have good credit. If you have poor credit it may be impossible for you to find a lender who will give you the funds you need. If this is the case and you need to pay back a personal loan quickly then the next best thing is to get an unsecured loan which will often carry a lower interest rate and a shorter repayment term than a secured loan.
Usually the quicker you pay back a personal loan the less interest you will be paying. If you want to know if I pay back a loan early then ask yourself one simple question. Would it be better for me to take out another quick loan to pay off the first one and then move on with my life? Or would it be better for me to put the loan off until later when my financial situation is more stable and I am better able to make responsible decisions?
It makes sense for someone who needs a quick cash loan to put the loan off as long as possible. However if you are planning on buying a house or anything that requires a large amount of money then it is a good idea to keep the personal loan paid off as quickly as possible. In fact in some cases it may actually help you to benefit from low interest rates if you choose to pay your loans back early. This is because if you start paying off a loan in its early months it will reduce the amount of interest you will be paying on the loan. By keeping the loan paid down you can also reduce the amount of time you will have to find a new loan if you happen to change your financial situation.
Of course if you need to keep the loan paid off then you should always try to make extra payments when possible. This will allow you to pay back the balance more quickly and therefore reduce the amount of interest that you will be paying. Also consider asking for a personal loan with a lower interest rate. Some lenders will be willing to offer this type of loan at a lower rate of interest, allowing you to pay back the money more quickly. In many cases taking out a personal loan with a low interest rate is actually cheaper than taking out a secured loan.