Early Loan Repayment & Prepayment Penalties: How to Pay Off Loans Fast
Learn how paying off a personal loan early saves on interest, how prepayment penalties work, and bi-weekly payment strategies.
By Sarah Jenkins, CFA
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Reviewed by David Vance, CFP
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5 min read
Why Pay Off a Personal Loan Early?
Because personal loan interest is calculated based on your remaining principal balance, making extra payments or paying off the entire balance ahead of schedule directly reduces the total interest paid over the life of the loan.
Understanding Prepayment Penalties
A prepayment penalty is a fee charged by some lenders if you pay off your loan early. Fortunately, over 90% of modern online personal loan lenders charge $0 prepayment penalties, allowing you to pay extra toward your principal at any time without fees.