5 Tips to Pay Off Personal Loans Early

5 Tips to Pay Off Personal Loans Early: Taking steps to pay off your personal loan faster than the standard repayment term can save you money on interest while freeing up cash flow sooner. With personal loan rates often between 6-36%, the savings from every extra principal payment makes a difference. It takes diligence and creativity, but with the right strategy, you can make sizable progress on shortening your payoff timeline.

5 Tips to Pay Off Personal Loans Early
5 Tips to Pay Off Personal Loans Early

5 Tips to Pay Off Personal Loans Early

Paying off personal loans early can help you save money on interest and achieve financial freedom sooner. Here are five tips to help you pay off your personal loans faster:

1. Make Bi-Weekly Half Payments

One of the most effective ways to make an extra payment per year is to split your regular monthly payment in half and pay that amount every two weeks. Most months have four weeks, so this equates to two full monthly payments over the normal eight weekly increments.

By dividing the principal and interest portions into 26 bi-weekly increments rather than 12 monthly installments, you end up making 13 monthly equivalent payments per year. This extra payment goes straight to reducing your principal balance.

Depending on the size of the loan, that extra principal reduction can shave months or even years off the lifetime of the debt. Just make sure bi-weekly payments are allowed by your lender without prepayment penalties. Automate payments for easier management.

2. Pay Tax Refunds and Bonuses Toward Principal

When you receive a financial windfall like a tax refund or employer bonus, consider putting that money toward an immediate extra principal reduction on your loan. Even if you can only afford to allocate a portion, lump sum payments have an outsized impact.

For example, on a $15,000 loan at 10% APR over 3 years, a single extra principal payment of $1,000 in the first year shortens the payoff time by 5 months and saves over $350 in interest compared to the original schedule. Tax time and bonus season provide great opportunities to make one-time progress.

3. Set Up Automatic Additional Principal Payments

Work with your lender to have a set extra amount automatically deducted each month in addition to the standard payment. Starting small, like an extra $20 or $50 per month, establishes the routine. Gradually increase the add-on amount over time as your budget adapts.

Before you know it, you’ll be comfortably making $100 or more in extra principal payments each month. The key is slowly ramping up the extra funds so it doesn’t shock monthly cash flow. Automating gives inertia and discipline to the incremental increases.

4. Round Up Monthly Payments

Some lenders allow you to opt into automatic payment rounding when submitting standard monthly payments. This rounds the payment up to the nearest $50 or $100 increment and applies the positive difference directly to the principal.

Even rounding up from $465 to $500 each month can generate an extra $35 toward the principal. While small, this adds up over the loan term while going mostly unnoticed in your monthly budget. Gradually increase the rounding over time to accelerate pay down.

5. Re-finance for Shorter Term

If your credit score has improved since origination, explore re-financing options to both shorten the repayment term and lower the interest rate. The tradeoff is higher monthly payments, but the long-run interest savings and the faster payoff may be worth it.

For example, refinancing a 3-year loan into a 2-year term before the halfway point can eliminate 12 months of interest accrual. Weigh closing costs against interest savings and run the numbers, but don’t extend the term any longer. A lower rate on a shorter term quickens the payoff.


Paying off loans faster centers on making consistent additional principal payments over time. Tap into one-time windfalls, set up automatic deductions, and continually increase extra amounts applied. With a disciplined approach, you can take control of payoff timelines and eliminate debt well ahead of schedule.



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