July 27th, 2011
Why You Should Pay Your Loans Off Early
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**Today’s guest post is contributed by MoneyAisle.**
There are mixed opinions when it comes to paying a loan off early, but the good seems to outweigh the bad.
There are a few ways to pay off a loan before the length of a loan has run out. You can make larger monthly payments, pay a large lump sum, or make additional payments throughout a monthly period. Any of these tactics will work well, and the extra money you pay will help decrease the overall loan amount.
The question then becomes: How do these payment strategies work for different loan types?
Paying an Auto Loan Quickly
Most people make monthly auto loan payments. Attempting to pay an auto loan off before the end of the agreed terms, or completing an auto loan refinance in exchange for a shorter term, not only helps your credit score, but will save you money in the long run.
The interest that you pay on a monthly loan can add up. When you increase your monthly payments or pay off a loan in its entirety, that interest no longer accumulates. You’ll also have the pure satisfaction of having more liquid money at the beginning of each month. Every dollar that you don’t put towards your car payment can be put towards something else!
Getting Rid of Personal Loans Fast
Just like a car loan, paying a personal loan off quickly is also a good idea. If it is possible to pay off a personal loan quickly, you can gain lots of spending money. Your credit rating will also improve if you are able to pay off a small loan within a short period of time. This, in turn, will improve your chances of gaining a loan in the future.
Some personal loans can’t be paid before a loan has run its course, but this depends on your loan terms. Simply look at the contract you signed to figure out whether or not you can pay a personal loan before the term has expired. If early payment is a possibility, go ahead and put any money you can spare towards paying it off.
Boats, RVs, Motorcycles, and All Other Loan Types
Almost any loan can be paid early. If you simply make minimum loan payments each month, you might wind up paying more than you think. Interest can really add up when it comes to loans of all kinds, but paying more than the owed monthly amount will always save you money in the long run.
If you can’t afford to pay off an entire loan amount in one shot, consider adding a few extra dollars to each monthly loan payment. Whether you have a personal, boat, RV, motorcycle, vehicle or other loan, you can count on the fact that deciding to pay a loan off early is always a wise decision.
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