How To Pay Off A Loan Quicker?

Question

Hello..
I have a personal loan I about 2 years ago to get 2 credit cards and my truck paid off.  I have about $16,000 ish left on it with 3 years to pay it off. I know it doesn't sound like much and 3 years isn't too far away.  I'm currently paying $425 a month, doing automatic payments, I'm curious if i can make extra payments and how much extra I should pay?  I have quite a bit of money saved up in my savings account which I'm not sure if that's a good idea to do it that way.  Now It's not  the end of world if i can't do it, or should i just let it go for the next 3 years?
THanks

Maxi · Accepted Answer

Read your contract which will state how the loan is set up and if you pay interest on capital or it is a fixed payment

STEVEN F · Answer

Some loans allow extra payments with no pre-payment penalty. Some only allow prepayment of the FULL balance.
I can't read your contract from here.

StarShine · Answer

You can always pay a loan off early. The question in whether or not it makes sense to do so.
The first thing you need to do is review your loan documentation. It will outline if you're allowed to pay extra, how much extra and if there is a penalty for paying of your loan early (which there sometimes is as the banks want to ensure they get their interest).
Once you have that information, you can determine if you'd rather pay more per month or pay it all off at once depending on the penalties for doing so.
Every loan is different and terms and conditions vary so it's hard to say if one way is better than that other.

Eva · Answer

If you have enough in your savings account for 6 months of living expenses, you could pay more down on your loan. It's very likely that the interest rate on your loan is much higher than the interest your savings earn.

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How To Pay Off A Loan Quicker?

4 Answers