Before you ask how to pay off a loan early, you should take time to determine whether or not you can. If you have other debts or lots of financial obligations, it may be better to concentrate on making consistent payments on schedule rather than paying off a loan early. If you’re trying to decide whether to put extra money toward a personal loan payment, ask yourself these questions:

 

Do I have room in my budget for extra loan payments?

 

Extra loan payments can affect your budget just like any other expense. Before you start paying down a personal loan early, take a look at your current income and account balances. You’ll want to avoid dipping into your savings to make extra payments, so make sure you have enough discretionary income to put toward your loan.
 

Will paying off a loan early cause issues with other payment obligations?

 

While you can lower your loan amortization with extra payments, don’t do so if you risk falling behind on bills or other debts. Consider all of your loans and make sure that you can afford at least the minimum payment on these before paying off your personal loan early. If another loan has a higher interest rate than your personal loan, it may be better to pay that one off first.
 

How long do I have to pay off my loan?

 

Many people start paying down personal loans early so they can avoid paying additional interest later on. While this is a sound strategy, it’s important to consider factors such as your loan period and payment amount before making any final decisions. For example, making small, additional payments on a 10-year loan may only shorten amortization by a few months. In contrast, making additional payments on a 3- or 5-year loan may help you save more time and money. A personal banker can help you decide whether paying off a loan early or putting your money into a savings account will be better for your financial goals.

When you make an additional loan payment, be sure to indicate in writing that you would like it applied to the principal amount. This will help reduce the amount of interest on your loan so you save money over the life of the loan.

 

If you’ve been making extra payments and would like to close your account, you can call or visit your local branch to get a payoff quote with a per diem interest charge. Confirm how long the payoff figure is applicable, as well as the options you have to remit payment—typically either online, in-branch, or by mail. If you are mailing a payment, be sure to add several additional days’ worth of interest to cover the mailing time. You may have to request a payoff letter for your records; however, at Santander Bank, we will automatically send you a letter confirming your loan has been paid in full.

 

Have other questions about personal loans?
Find the answers to frequently asked questions about loans.

Need a personal loan to help cover expenses? At Santander Bank, you’ll receive competitive rates with no collateral, application fees, or annual fees. Plus, you’ll receive a rate discount when you set up automatic payments from any Santander checking account. Learn more about our personal loan product to decide whether it’s right for you, then visit your local branch to speak with one of our bankers.