Paying Off A Loan Early


Are you thinking of paying off a personal loan early? Many people try to pay down their loans ahead of schedule to improve their credit score, shorten their repayment timeline, or just to avoid being in debt. But before you start applying extra payments to your loan, it’s important to review your finances and develop a payment plan that fits your budget and needs.

Should you reduce your loan amortization with extra payments?

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.

How to pay off a loan early

There are many different techniques for paying off a loan early. While many people will tell you that their way is best, it’s important to choose a method that works for your budget and lifestyle. Some effective payment methods include:

  • Dividing your monthly principal and interest by 12, then adding that amount to your monthly payment. This adds up to 13 payments per year while eliminating the need for a large lump sum.
  • Use additional money from a bonus, tax refund, or other unexpected windfall to help pay down your principal.
  • If paying off your personal loan early is a top priority, consider looking for a source of additional income that you can dedicate to your goal. Consider taking on a side job, and then putting the money you earn toward your loan.
  • Too busy for a side job? Consider a temporary cut in luxury purchases to fund additional loan payments.

Loan payment calculator

Have a payoff timeline you’re trying to meet? Use our loan calculator to help you determine how much you’ll need to add to your monthly payment to meet your goal.

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.

Keep this information in mind when you apply for your next loan

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.


All loans subject to approval.

Santander Bank does not make any claims, promises, or guarantees about the accuracy, completeness, or adequacy of the information contained in this article. Readers should consult their own attorneys or other tax advisors regarding any financial or tax strategies mentioned in this article. These materials are for informational purposes only and do not necessarily reflect the views or endorsement of Santander Bank.

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