Should I Repay a Loan Early?

You might hear a lot of people saying that it is beneficial to repay a loan early. However, you may wonder whether this will be a good idea to do this for yourself. It is worth understanding the reasons why it might be a good idea but also things that need to be cautious of as well.


A loan usually costs more money, the longer you have it. This means that repaying it early will mean that it will not be so expensive. This is because you are charged interest on the money all the time that you owe it. Therefore, the sooner you repay it, the less interest you will have to pay. However, you need to check with the lender to see how much they will charge you for repaying the loan early. Some lenders will not charge you at all, but some will have an ‘early redemption fee’ which means they charge you a sum of money for paying it off early. This is something that may just be a reasonably small admin charge or could be a very large amount of money. You need to find out how much it is and then you will be able to calculate whether you will save more than this if you repay early. Calculate how much interest you will save if you repay the loan early and whether this is more or less than the fee. If you will save more in interest than the fee then it is worth repaying it early.


Most loans such as those offered by Cobra will have regular repayments, although some might have a less rigid repayment schedule. These repayments might be hard for you to manage. It can be annoying too, having to pay out a big chunk of money each month, which might mean that you do not have so much left to pay for other things. Not having these repayments to make can be a big relief and can make you feel like you are freer and more relaxed as a result of not having this financial commitment.

The less debt you have, the better your credit rating should be.

Credit rating

If you have less debt then it usually will have a positive effect on your credit rating. This means that if you need to borrow money, rent a property or do something else that relies on you having a good credit rating, then you will be more likely to be successful if you have repaid the loan early. Most people will see this as a big positive.

Finding the money

Of course, you will need to find the money to repay the loan. This could be a big hurdle to some people. If you already find it tricky to make ends meet, then finding some extra money to help with repaying a loan may seem almost impossible. However, if you can even make a small repayment it will help you as your interest charges will be lower. Therefore, it will be really useful to try to find the money to be able to do this. You might therefore be able to think of some ways that you can earn more money or that you can spend less. It is worth brainstorming some ideas and picking a selection of things to try so that you can find a way that works well and will allow you to start repaying. Even if it is just a small amount to start with, hopefully you will get better and better at earning more and spending less so that you will be able to increasingly be able to repay more and more of the loan until it is all paid off.

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