Can I pay off my personal loan early?

Can I pay off my personal loan early?

By Kerri Jackson. Posted 6 March 2020. Categories: Personal Finance.

Can I pay off my personal loan early?

Personal loans can be a practical and efficient way to achieve a goal. Whether you want to start your own business, buy a new car or do anything else that needs a cash injection, life can be that little bit easier when your bank balance is healthier. 

With careful planning and budgeting, you can work out an affordable repayment schedule for your personal loan. However, you may find that as time goes on, things change that put you in a healthier position than you expected and want to pay off your loan more quickly – maybe even in full. 

There are many good reasons to do this, though some lenders charge penalties for paying off your loan early. That's not the case for personal loans taken out through Harmoney. 

The financial benefits of paying off a personal loan early

The main benefit of paying a personal loan back early is that it saves you money. 

No matter how long your loan term, the earlier you can pay off your debt, the less money you'll have to pay in total. That's because, with interest, you pay more the longer you have a loan.

Using our personal loan calculator, you can see this in action. A $30,000 loan with great credit history totals $3,898 in interest over three years, but $6,228 over five years. 

With Harmoney, unlike many other lenders, there is no fee for paying your loan off early. Apart from the fee you pay at the start of your application, the only money you pay is the return on your loan and the agreed rate of interest (unless your account becomes overdue).

Other benefits of paying off a loan early

As well as saving lots of money, you'll also find that you can enjoy the feeling that comes with freedom from debt. This is especially true for people paying off debt consolidation loans, as they know only too well the stress of having unmanageable debts. 

Once you've paid off all the money owing, you'll find that your monthly budget stretches further and you can put your income to immediate use in areas that you may have been neglecting. 

How to pay off your loan early

There are three ways to pay off your Harmoney loan quicker than set out in your contract:

  1. Increase your monthly repayments

  2. Pay lump sums throughout your loan term

  3. Pay off your loan in full with one lump sum.

It’s important to note that all of these approaches are completely optional. You can, of course, simply make your regular scheduled repayments over your 3 or 5 year term.

Increase your monthly repayments

If you've been able to make your monthly repayments easily, or your finances have changed (maybe you got a nice pay rise), it's possible to increase the amount you pay back each month. By doing this, you'll be able to make larger contributions and pay back your debt more quickly. 

If you want to change details of your personal loan through Harmoney, either email our customer service team at service@harmoney.com.au or call 1300 042 766.

Pay a lump sum

If you've come into a bit of money – maybe your new business won a big contract or you've been given a generous birthday present – putting it towards your loan will reduce the amount owing and lower the interest you have to pay for the remainder of the term. 

To do this, make a payment to Harmoney through BPAY.

You can then should log into the portal to see the amount you owe come down plus your BPay details - the Biller Code and individual BPay Reference number. Once you have these details, login to your own customer banking portal, and follow the instructions for BPay payments (often its Transfer money).

Paying off your loan in full

If you want to pay off your remaining loan in one fell swoop, you need to go through a slightly different step. 

First, log into the Harmoney dashboard. Make your way to 'My loan' and then click on 'Payout'. On the next screen, put the date you would like to make the final payment on and select an option from the drop-down menu. If you're happy with the estimated payment, click on 'Send instructions' for the next steps. 

These instructions will let you know how to pay off your debt early, but be sure to make the payment by the date stated, otherwise the situation could change. 

If you have the means, paying off your loan early can be a smart move. Just make sure to check your budget so you can be confident that you won't be causing yourself any short-term cash flow problems.

Disclaimer. Information in these articles is written to provide general guidance, and any details are correct at the time of posting. You should consider how the information might apply to your personal circumstances, and consider whether your needs mean you should seek specialist advice.