Early Repayment of Consumer Loans – Is It Worth It?

Consumer Loans
Consumer Loans

If you are looking for quick cash, consumer loans are the perfect solution in a moment of crisis. But letting them haunt you for a long time is certainly a bad idea. In fact, lots of people prefer to pay them back early and avoid high interest rates in the future. Even if you don’t find that early payment part in your contract, you should know it is your legal right to pay before the end of the repayment period. Online loans should have such a clause as well. The early repayment procedure has both advantages and disadvantages. We will make sure to review the most important of them and show you which ones prevail.

Paying Consumer Loans Early – Pros

Before deciding whether to pay off your consumer loans early, you should know what are the main pros. The biggest advantage is that you won’t have to pay interest rates anymore and you can actually save money. Keep in mind, there might be an early repayment fee, but still hardly as high as the interest you had to pay until the end. If you have taken out online loans, you will probably save a lot since their interest rates are even higher.

Another great advantage of paying a loan early is that you can increase your credit score. When this score is calculated, “amounts owed” is among the primary variables. When you pay off your consumer loans earlier, that number will be adjusted in your favor. If you have a good credit score, you will have the chance to get an approval for loans with more favorable terms in the future. And last but not least, early repayment of personal online loans or any other type guarantees you freedom from debt.

Consumer Loans Early Repayment – Drawbacks

No matter how advantageous it may seem, early repayment of loans has disadvantages too. We mentioned that it saves you from paying high interest rates. But the opposite situation can also occur. If your loan has a low interest rate, it might not be such a good idea to pay it off earlier and spend more on additional fees.

Another major drawback is the compensation that online lenders in Bulgaria usually claim. The lender might request such payment if you pay off the loan during a period for which you have agreed on a fixed interest rate. The different banks and lenders may claim compensation in various amounts. In most cases, it is at most 1% for consumer loans that are paid back 1 year before the contract ends. The compensation will be lower if you request to pay early less than 1 year before the end date of the contract.

If you consider early repayment of consumer loans, you should be very careful because some financial institutions have strict terms and conditions. If you breach any clause regarding paying off earlier, set forth therein, you will be penalized. When you pay in advance, the lender won’t receive the expected interest, so penalties are often imposed. This also applies to online loans.


In general, if there is no fee, you can benefit from early repayment of consumer loans. Even if you have such a clause in your contract, you can still save money. It all depends on the specific conditions of the lender. What you should do is research everything thoroughly before taking any action. You should calculate how much you can save when paying off early by considering the remaining interest and the ongoing fees. Most financial companies that offer consumer loans online have special calculators which can help you calculate all loan parameters.

However, to find out more about early repayment, you might have to read the full terms and conditions. In today’s uncertain times, you may always have to take out a loan in the future. For this, you will need a good credit score and you can get it if you pay off a loan early. It seems that early repayment makes sense and the advantages outweigh the disadvantages, so don’t hesitate to explore that option.

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