An installment loan allows a person to borrow a lump sum of money upfront. They then repay the principal plus interest every month. When they take out an installment loan, they can follow the repayment schedule they agreed to in their loan agreement and pay it off at the end of their loan term. Or they can repay the loan early.
While it’s possible to pay off the loan early, the borrower should weigh the pros and cons before they do so.
The most important benefits of paying off an installment loan early include:
These are the major drawbacks of repaying an installment loan ahead of schedule:
An installment loan is a convenient and affordable way to cover various expenses. But paying it off early isn’t always the best choice. That’s why it’s always best for a person to weigh the pros and cons of doing so before pursuing an early payoff and do what works best for their budget.
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