How to pay off a secured loan early?

Paying off a secured loan early can be a great way to save money on interest and clear your debt sooner, but it’s important to understand the process and potential fees involved. Read this guide to learn more about how to do it.
Understand your loan terms

Before making any decisions, check your loan agreement to see if there are early repayment charges. Many lenders charge a fee, to compensate for the interest they would lose. Some lenders charge a percentage of the remaining loan, while others charge a flat fee, so it varies. These fees can be high, so make sure you understand your loan terms before deciding.

How do I pay off a secured loan early?

If you want to pay off your secured loan early, there are 3 simple steps:

Contact your lender to request a settlement figure. This is the total amount you need to pay to close your loan, including any early repayment charges. Make sure you have enough funds to cover this amount.
You can either pay the settlement figure in full or continue with your regular monthly payments.
If you choose to repay the loan in full, make the final payment to clear the balance.

Consider overpayments

If paying off the entire loan is not possible, consider making overpayments. Overpaying may allow you to reduce the balance faster and pay less interest over time. However, some lenders may still charge a fee for overpayments, so check with your lender first. Furthermore, if the balance is reduced to zero, you may still incur an early repayment charge.

At Central Trust, we allow overpayments on all of our products without penalties. You are able to choose to reduce the term or the monthly payment. Making overpayments may help to reduce the overall interest charged on your loan.

Weigh up the costs and benefits

Although there might be fees for paying off your loan early, it may still save you money in the long term by reducing the interest that would have built up over time.

Use a loan calculator or speak to a financial advisor to see if early repayment is worth it in your case.

Plan ahead

If you're thinking about paying off the secured loan early, it's essential to plan your finances to ensure you won't leave yourself short. Additionally, early repayment may improve your credit score, as clearing the debt reduces your overall liabilities.

By following these steps, you can assess whether paying off your loan early is the best decision, and avoid unexpected fees. Always discuss your options with your lender before taking action.

Summary

Paying off a secured loan early can be a smart way to save on interest and reduce financial stress. However, it is important to weigh up the costs and benefits before you decide to pay off your loan early. Start by checking for early repayment penalties, then create a plan to make extra payments. Ensure you understand the potential costs associated with paying off your loan early, and discuss with your lender before deciding.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.