When you take out a loan, you agree to repay it over a set period of time. But life doesn’t always stay the same. You might come into extra money, or your priorities may change.
So, can you pay off a loan early? In many cases, you can, but it’s not always as simple as it sounds. Paying a loan off early could help reduce interest. However, there may be fees to consider, especially with secured loans.
In this guide, we’ll cover:
- Whether you could pay off a loan early
- How early repayment charges work
- Whether paying early could save you money
- How this may affect your credit score
- Alternatives like overpayments or refinancing
This guide is for information only. It explains options for paying off a loan early but should not be taken as advice to do so.
Can you pay off a loan early?
In the UK, lenders are usually required to allow early repayment on personal (unsecured) loans. If you have a secured loan, like the ones we offer at Evolution Money, you may also be able to repay early. This is sometimes called ‘settling’ your loan.
However, you may need to pay an early repayment charge (ERC). This is a fee for ending the agreement before the agreed term.
At Evolution Money, we’re clear about any fees from the start. You’ll find full details in your binding mortgage offer.
Can you pay off a secured loan early?
Yes, you can. But there are a few things to think about first.
Secured loans are tied to your property. This means:
- You may have longer loan terms
- You may have borrowed a larger amount (compared to an unsecured loan)
- Early repayment charges may apply
Because of this, the cost of repaying early could be higher than with some unsecured loans.
That said, you could still save money overall. It depends on your interest rate, how long is left on your term and the fees involved.
At Evolution Money, we encourage customers to check their settlement figure before making a decision. This helps you see the true cost clearly.
Is it cheaper to pay a loan off early?
It could be. But not always.
Loans build interest over time. So, paying early may reduce the total interest you pay. However, this saving needs to be balanced against any early repayment charges.
You may find it helpful to ask your lender for a settlement figure. This usually includes:
- Your remaining balance
- Any interest owed up to the settlement date
- Early repayment charges
- Any additional fees
Once you have this, you can compare it with the cost of continuing your monthly payments.
How much could you save by paying off a loan early?
The amount you could save depends on:
- Your loan balance
- Your interest rate
- How long is left on your loan
In general:
- The longer left on your term, the more you could save
- The higher your interest rate, the bigger the potential saving
If you’re near the end of your loan, the savings may be small. In some cases, fees could outweigh the benefit.
How do you pay off a loan early?
The process is usually straightforward:
- Contact your lender and request a settlement figure.
- Review the costs carefully. It’s only worth going ahead if paying the loan off early will save you money in the long run.
- Decide whether to proceed.
Your settlement figure is typically valid for 28 days. If you don’t act within that time, you may need to request a new one.
You may be able to manage this process online or over the phone, depending on the lender.
Does paying a loan off early affect your credit score?
It could have a small impact on your credit score.
Making regular repayments on time helps build your credit history. Paying off a loan early means that account closes sooner. This may slightly reduce your credit history length. However, this effect is usually small.
Missing payments or defaulting on a loan, for example, would have a much bigger impact.
Can you make partial repayments instead?
Yes, depending on the lender. This is often called an overpayment.
Overpayments allow you to:
- Reduce your balance faster
- Lower the amount of interest charged
- Keep your loan open
You could make one off or regular overpayments.
Some lenders may limit how much you can overpay each year. Others may charge fees or not allow overpayments at all. Always check your agreement so you understand what’s allowed.
Can you cancel a loan instead?
For unsecured loans, you usually get a 14-day cooling off period. This means you could cancel the loan within 14 days if you change your mind.
If you’ve already received the funds, you may need to repay them quickly to avoid paying interest.
For secured loans, the process is slightly different.
At Evolution Money, you’ll have a reflection period before accepting your loan. This gives you time to review the terms and decide if it’s right for you.
Other ways you could reduce loan costs
Paying early isn’t the only option if you want to save on interest payments.
Refinancing
You could take out a new loan with a lower rate and use it to repay your current one. This is commonly known as a debt consolidation loan.
This may be helpful if:
- Interest rates have dropped since you took out your original loan
- Your credit score has improved
However, fees may still apply. It’s important to compare the full cost.
If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
Reducing your loan term
You may be able to shorten your loan term. This means reducing your number of repayments, which reduces how much interest is charged.
This could:
- Increase your monthly payments
- Reduce the total interest paid
However, bear in mind that your new monthly repayments will be larger. You’ll need to assess whether you can afford them.
Not all lenders offer this option, but it’s worth asking.
So, is paying a loan off early a good idea?
Ultimately, this depends entirely on your situation.
Before making a decision, ask yourself:
- Could you afford the repayment comfortably?
- Would the interest saving be more than the early repayment charge?
- Do you have other bills that need paying off first, such as rent, mortgage or utilities?
If the numbers work in your favour, early repayment could be worth considering.
Compare your borrowing options with Evolution Money
At Evolution Money, we specialise in secured loans for homeowners. We understand that your circumstances may change over time. That’s why we’re always clear and transparent about things like early repayment and fees.
You could borrow up to £105,000, with repayment terms from 3 to 20 years.
Check your eligibility today or explore more guides in our Help & Advice hub.
Important:
All loans are subject to status and eligibility. Available to UK homeowners aged 21–70. Terms and conditions apply. Not all applicants will be accepted.
Think carefully before securing a loan against your home. Your property may be at risk if you do not keep up with repayments.
If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
Representative 21.82% APRC (Variable)
For a typical loan of £18,900 over 180 months with a variable interest rate of 18.72% per annum, your monthly repayments would be £335.99. This includes a Product Fee of £1890.00 (10% of the loan amount) and a Lending Fee* of £763.00, bringing the total repayable amount to £60,478.00. Annual Interest Rates range between 8.6% to 27.87% (variable). Maximum 50.00% APRC. *Lending Fee varies by country: England & Wales £763, Scotland £1,051, Northern Ireland: £1,736.
Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
