When It's A Bad Idea To Pay Off Your Loan Early
On the surface, it may seem like a good idea to pay off your loan early. After all, the longer you are paying off a loan, the more interest you are going to have to pay, right? Well, while that is true, things are actually a bit more complicated.
Getting all the facts before paying off your loan is important so, let's talk about when it's a bad idea to pay off your loan early.
Should You Pay Off Your Loan Early?
Loans Help Build Credit: Paying Them Off Early Can Prevent This
It may sound odd to a lot of people, but the truth is, you can help your credit more by paying off a loan over its intended period of time as opposed to paying it off early. You see, a loan works as a credit card does. Making one big payment on a debt only counts as paying a debt one time.
But paying the same sum in increments boosts your credit more because you get to make several on-time payments, which reflects well on you and your reliability. We'll readily admit that this seems a little counter-intuitive, but that is how credit is determined.
Of course, it's not like a single loan is going to make or break your credit score in most cases, assuming you have many other things factoring into it. And it's not like you'll outright harm your credit score if you pay off your loan early either. That isn't a bad thing in and of itself, it just reduces how much benefit a loan can have for your credit.
Basically, if you need to build up your credit a bit, then it would be a good idea to pay off your loan over the regular period, rather than pay off your loan early.
Some Loans Have Early Repayment Fees, Which Are Expensive
You probably know how a lender makes a profit: interest. Lending money is a business, and the person lending money can't make any if you only pay back exactly what they lent you. Interest is generally paid back over a period of time, and with loans, that tends to come in installments spaced out over several months.
So, as the borrower, it can seem like a good idea to pay off your loan early. After all, if you pay off your loan, say, five months in advance, that's five months of interest you don't have to pay, right? You'll be saving a ton of money. Well, that can be true in some cases, but it rarely is.
As mentioned, lenders make money on interest, so naturally, they don't want you to pay off your loan early. To prevent borrowers from doing this, many loans have early repayment fees: these are fees you have to pay just for the ability to pay off your loan early. Oftentimes, these fees will be more expensive than the interest you're avoiding.
This is not to say that all loans have early repayment fees. Some don't. However, many of them do, so it's not always a good idea to try and pay off your loan early. Always be sure to read the fine print of your contract and see what restrictions and rules you have to contend with.
Getting A Loan With Carolina Title Loans, Inc.
If you feel that a loan is right for you, Carolina Title Loans, Inc. has a few different loan options that you can use to address any financial emergency you are experiencing. These options include a title loan of up to $15,000 with just a few simple requirements and an easy loan process.
To get started, fill out the online inquiry form on our website letting us know that you are interested in a loan, and a representative will contact you via phone as soon as they can.
If you are interested in a title loan, you'll need a state-issued ID, a lien-free title to your vehicle, and your vehicle to be inspected. If you do not own your vehicle outright, then a title loan is not the loan for you. You may want to look into other loan options, such as a signature loan.
During the call, the loan representative will set up a time to meet at one of our store locations. Simply bring the aforementioned items to the meeting, and the representative will verify all documents and determine how much you qualify for.
After approval, the representative will walk you through the rest of the process, having you sign the required documents and answer any questions that you may have. You will be able to receive your money either on the day of approval or the following business day.
Get A Carolina Title Loan Today!
As you can see, the process for a title loan is quick and easy, so if you find yourself in need of a loan to cover some unforeseen expense, give us a call or get started with the online inquiry form to speak with one of our representatives today!
Get the money you need when you need it with the help of Carolina Title Loans, Inc.!
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.