Are those monthly personal loan payments turning into a headache? Seeking a way to slash interest fees and boost your credit score?
Look no further — the answer lies in eliminating your personal loan debt ahead of schedule.
This guide will walk you through the steps necessary repay your loan and analyse whether or not this is better to repay your personal loan early.
What is a Personal Loan Pre-closure?
A personal loan pre-closure involves settling the loan before its scheduled due date. To accomplish this, the outstanding sum on the loan must be paid in full, together with any applicable fines and penalties, such as those for paying the loan off early.
Because the particular steps required to pre-close your loan can differ from one lender to the next, it is crucial to get in touch with your lender in order to obtain direction before moving forward with any procedures.
The Pros and Cons of Early Loan Repayment
Clearing your loan balance before its maturity date has both its advantages and disadvantages.
On the bright side, it may provide considerable financial benefits like as lowering the overall amount of interest paid, improving your rating, and freeing up cash flow for the possibility of future borrowings.
However, there are some drawbacks that should be taken into consideration.
The likelihood of being subject to a prepayment penalty, which may result in the loss of any potential savings, is one of the drawbacks.
Additionally, early loan repayment might leave you without a financial buffer for unforeseen expenses.
- Advantages Reduced monthly interest payments
- Increased quality of the credit score
- More leeway in one’s financial situation
- In the future, better terms regarding loans
- Penalties for early loan repayment
- Depleted reserves in the emergency fund
- Could have an effect on your credit history
Is it a Wise Decision to Settle My Personal Loan Ahead of Schedule?
Should you repay your personal loan early? The decision to pay off your personal loan early depends on your current financial situation. If you’ve recently experienced a boost in income or your business is yielding higher profits, clearing your loan ahead of time can be a savvy move.
Not only does early repayment save you substantial amounts in interest charges, but it can also positively influence your credit score.
For instance, you have a personal loan with a principal balance of 10,000, an 8% interest rate, and a three-year term. Closing the loan one year early could result in savings of over $700 in interest fees alone.
However, if you’re already facing financial challenges, think twice before proceeding with early loan closure. Settling the entire outstanding balance entails shouldering early repayment fees and charges, potentially worsening your financial situation.
Failing to meet payments may also have a negative impact on your credit score, so weigh all factors carefully before making a decision.
How to Settle Your Personal Loan Early in Singapore?
While specific procedures may vary among loan providers, here are the general steps to guide you:
Here’s a step-by-step guide on how to close your personal loan early in Singapore:
- Check for early fees or charge. Before proceeding, review your loan agreement for any fees or charges related to early repayment. You can find this information in the contract terms or by directly contacting your lender.
- Determine the outstanding balance. To close your personal loan early, you need to know the total unpaid balance. This information helps you prepare to pay off the remaining amount using funds from a raise or other incentives.
- Inform your lender. Contact your lender and inform them of your decision to close the loan early. The lender will guide you through the pre-closure process and provide a list of necessary documents for preparation.
- Pay off the remaining balance. Once you have the required documentation in order, proceed to clear the outstanding loan balance along with any associated fees.
- Receive confirmation of loan closure. After completing the payment, visit your lender to ensure that the loan is officially closed. This confirmation releases you from any further obligations, allowing you to allocate your funds elsewhere.
What are the Benefits of either Closing or Pre-Closing a Personal Loan?
The finalisation or even the pre-closing of a personal loan is significant for a number of different reasons. To begin, it assists in the prevention of any outstanding unpaid debts that are associated with your name, which contributes to your general financial stability.
In addition, paying off your loan early gives you financial independence, which enables you to make investments, save money for potential future endeavours, or even submit an application for a new loan.
Moreover, providing you with greater financial flexibility, paying off your loan earlier than expected might have a favourable impact on your credit score. It sends a message to your creditor that you are a responsible borrower who has a history of meeting all of their financial commitments on time and in full.
Your creditworthiness will likely improve as a result of this, and you may find that future financial prospects are more favourable as a result.
To cut costs, you might want to consider prepaying your personal loan in Singapore; however, before making any decisions, you should first confirm the specifics with your lender, such as whether or not there will be any fees associated with early repayment.
Consider how you might make the most of your newly acquired financial freedom when you have finished paying off your dues. If you want to make the most of the independence that comes with your financial situation, you should investigate several possibilities like building your savings or investing your money.
Are you still in short for funds, and need quick funds today? Consider using our loan matching plat to find the best personal loans in Singapore.