Are Early Repayments Right For You?
Parents and adults often face the dilemma of whether to save money or pay off bills and debts. It’s a common question and one that doesn’t always have a clear answer. Sometimes it’s better to hold onto your cash and let your debt build-up, while other times it makes more sense to start chipping away at that balance as quickly as possible. In this blog post, we’re going to take a look at some of the benefits of early repayments – so you can make an informed decision about what’s best for you and your family.
One of the biggest benefits of early repayment is that you can save money on interest. The longer you take to repay your loan, the more interest you’ll accrue, and that can add up to a lot of extra money over time. If you’re able to make even just a few extra payments each year, you can significantly reduce the amount of interest you’ll pay overtime.
Another benefit of early repayment is that it can help improve your credit score. Your credit score is a number that reflects your creditworthiness – or how likely it is that you’ll be able to repay a loan. A high credit score indicates that you’re a responsible borrower, while a low credit score suggests that you may be a riskier investment. If you’re looking to take out a loan in the future, or if you want to improve your current credit rating, making early repayments can be a great way to do it.
On the other hand, there are also some disadvantages to early repayment. For one thing, it can mean liquidating your emergency savings. This can leave you in a bind if an emergency arises. It can put a strain on your finances and make it difficult to cover other important expenses.
It’s also important to remember that there is an early repayment penalty on some loans. This is done by some financial institutions to protect their revenue stream. Before signing your Letter of Offer by your financial institution, read the document carefully and take note if this clause is included in your offer. To determine whether early repayment is right for you, you will need to thoroughly calculate the penalty versus the benefit. If it does not seem wise to consider early repayment, then you might consider letting it run to term.
Additionally, if you have faced challenges making your monthly payments over the life of the facility, this will be reflected on your credit check. In this case, early repayment may not be the best option since it may affect your ability to get new funding if you require it.
So, what’s the verdict? Is early repayment right for you?
There is no simple answer – it will vary from person to person and it depends on your specific situation. But generally speaking, early repayment can be a good way to save money on interest, improve your credit score, and get out of debt faster. If you’re able to afford the extra payments, it’s definitely worth considering. It’s important to weigh all of your options however and make a decision that’s right for you. If you’re still unsure, it may be worth talking to a financial advisor – they can help you navigate these tricky waters and come up with a plan that’s tailored to your specific needs.
Fidelity Finance does not charge an early repayment penalty for loans.
For more information about our financial services, contact Fidelity Finance.