How to Pay Off Your Personal Loan Sooner: 3 Expert Tips to Save on Interest

You might find it odd that we’ve published an article with tips and tricks on paying off your loan sooner, but if you haven’t noticed yet, we are a different kind of company – one that puts your financial best interests first.

A personal loan is like a mortgage or auto loan. Your payment is divided into two parts: interest and principal. Each month, a portion of your loan payment goes towards paying off the interest accrued for that billing cycle, and the rest goes towards reducing the principal balance (the original amount you borrowed). When you pay more than the minimum monthly payment, the additional money is applied to the principal balance, decreasing the amount of interest you will pay over time and paying down your loan sooner.

We’ve broken down the three most common pay-down tactics to determine which will save you the most money and help you pay off your loan quickly.
For easy comparison, we used the same unsecured personal loan terms for each tactic:
Loan Amount
$10,000
Interest Rate
18%
Annual Percentage Rate
21.52%
Term
48 months
Payment Amount
$293.75

Tactic 1:

Round up your payment amount

  • The Details:
    Your monthly payment is $293.75. However, you decide to round up to $350, putting $56.25 more towards your monthly principal paydown.
  • The Result: Good

    This tactic will save you over $1,100 in interest and pay off your loan 10 – 11 months sooner.

Tactic 2:

Split your monthly payment amount in two and pay twice a month

  • The Details:
    You can round your payment like in tactic one, but rather than paying $350 once a month on the 15th, you pay $175 on the 1st and then another $175 on the 15th.
  • The Result: Better
    This tactic saves over $1,200 in interest and will pay off your loan 11 – 12 months sooner.

Tactic 3:

Use a windfall like a tax refund to make one large payment once a year

  • The Details:
    According to the IRS, the average 2023 tax refund was $3,167, and 2024 is shaping up to be even more. Paying the minimum monthly amount of $293.75 but utilizing $1,000 of your tax refund to make an additional payment once a year.
  • The Result: The Best

    You will pay off your loan 14 – 15 months sooner and save over $2,000 in interest.

Taking proactive steps to pay off your personal loan sooner can save you money on interest and help you achieve your financial goals faster.

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* Applications submitted may be funded by one of several lenders including First Electronics Bank, a Utah-chartered bank, Member FDIC; Coastal Community Bank, Member FDIC; and LendingPoint, a licensed lender in certain states. Loan approval is not guaranteed. Minimum loan amounts apply in Georgia, $3,500; Colorado, $3,001; and Hawaii, $1,500. Upon final underwriting approval to fund a loan, said funds are often available the next non-holiday business day. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary. Loans are offered from $500 to $10,000 (loan amount maximum based on MCC codes), at rates ranging from 7.99% to 35.99% APR, with terms from 24 to 48 months. For example, for a well-qualified customer, a $5,000 purchase will have a 90-day promotional period with no interest, a 3% fee, and $100 monthly payments. After the promotional period, a remaining balance will be a 24-month term loan, and $263.72 monthly payments with an overall APR of 26.54%.

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