Is it worth paying off a personal loan early?

If your rate is above 7-8%, usually yes — the interest savings are significant. If below 5%, you might earn more by investing the extra money. Between 5-7%, it's a personal preference between mathematical optimisation and the peace of being debt-free.

Will paying off a personal loan early help my credit score?

Paying off a personal loan can cause a small temporary dip (from closing an instalment account), but the long-term effect of lower total debt is positive. The dip is typically 5-15 points and recovers within 1-2 months.

Should I pay off a personal loan or credit card first?

Almost always credit cards first — they have higher interest rates (22% average vs 9.5% for personal loans). The exception is if your personal loan has a very high rate (15%+) from a subprime lender.

Can I pay off a personal loan with another personal loan?

This is refinancing — and it makes sense if the new loan has a significantly lower rate. But watch for origination fees (1-8%) and make sure the total cost (rate + fees) is actually lower than your current loan.

Personal Loans

How to Pay Off a Personal Loan Early (2026 Guide)

To pay off a personal loan early, make extra payments directed toward the principal each month. On a typical £10,000 personal loan at 9% APR over 5 years, paying £75 extra per month saves over £1,100 in interest and clears the loan 18 months early. Always check for early repayment charges first — UK lenders can charge up to 2 months' interest, while most US personal loans have no penalty.

9.5%

Average personal loan APR

Personal loan rates range from 6% (excellent credit) to 36% (poor credit). Your rate determines how much extra payments save.

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Personal loans sit in the middle of the debt spectrum — lower rates than credit cards but higher than mortgages. They're used for everything from debt consolidation to home improvements to unexpected expenses.

Because personal loans have a fixed term and fixed rate, they respond predictably to extra payments. Every additional pound goes directly to reducing principal, and you can calculate the exact savings with precision.

This guide covers the specifics of personal loan early payoff — when it makes sense, how to do it, and what to watch out for.

See your exact payoff date right now

Personal loans have a fixed end date. The deadline calculator lets you set your target payoff date and see the exact extra payment needed — perfect for structured loan repayment.

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Step-by-step plan

Check your loan terms for early repayment charges

UK lenders can charge up to 1-2 months' interest as an early repayment fee. US personal loans rarely have prepayment penalties, but check your agreement. Calculate whether the interest savings outweigh any penalty — they usually do.

Know your current balance and rate

Log into your lender's portal for the exact payoff balance. Note whether your loan uses simple interest (most personal loans) or precomputed interest (some subprime lenders) — with precomputed interest, early payoff saves less.

Decide between extra monthly payments or lump sums

Both work. Regular extra payments are easier to budget for. Lump sums (from bonuses, tax refunds) make a bigger one-time impact. Ideally, do both — set up a recurring extra payment and add windfalls when they come.

Direct extra payments to principal

When making extra payments, contact your lender to ensure they're applied to principal, not advanced to future payments. Some lenders default to advancing your due date, which doesn't reduce interest cost.

Consider the avalanche order if you have multiple debts

If your personal loan isn't your highest-rate debt, you might save more by attacking higher-rate debts first. Use a debt payoff calculator to compare the total interest under different ordering strategies.

Track progress and celebrate milestones

Personal loans have a satisfying quality: the balance goes down predictably with each payment. Track your progress percentage and celebrate milestones at 25%, 50%, and 75% paid. The Payoff app does this automatically with milestone celebrations.

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The Payoff app builds your complete payoff plan with AI coaching, milestone tracking, and the strategy that matches your personality.

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Tips for personal loans

If your personal loan rate is above 10%, consider refinancing. Rates have fluctuated significantly — if your credit has improved since you took the loan, you may qualify for a much lower rate.

Biweekly payments (half your monthly payment every two weeks) result in 13 full payments per year instead of 12 — an easy extra payment without feeling the difference.

If you took a personal loan for debt consolidation, avoid the trap of running up the credit cards again. Cut up or freeze the cards you consolidated.

Don't raid your emergency fund to pay off a low-rate personal loan. Having 0 debt but 0 savings is a precarious position that leads to more debt if anything goes wrong.