Can I Pay Off A Personal Loan Early
Were here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey.Read moreWe develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide.We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right.Read less
Perhaps youve gotten a raise or a bonus, and you want to pay off the remaining balance on a personal loan. Is that possible? The short answer is yes and, in many cases, it can be a wise decision.
After all, when you get extra cash, it can often be beneficial to pay off debt. But, if theres a prepayment penalty, then this loan payoff may be more costly than what youd expect.
A prepayment penalty is a provision in a loan agreement that states a penalty will be charged if the loan is paid off within a predetermined time frame, say two years.
This post will review ways to find out if your loan has a prepayment penalty, and how the presence of this penalty could affect your decision about whether or not to pay off the personal loan early.
Also included, is information on avoiding a prepayment penalty in the first place, and suggestions for steps you can consider if you want to pay off a loan that has one.
How Can You Pay Off Student Loans Early
So if youre burdened with high interest student loan debt, what can you realistically do to pay off your student loans early?; Well, as I see it, there are 4 options available:
- Live like a pauper and put every penny you can toward paying extra on your debt.
- Commit years of your life to the military or a service organization willing to pay off your loans.
- Find ways to make extra money you can put exclusively toward your student loans.
- Refinance your student loans to a lower interest rate using a service such as SoFi.
Of course, Ive written extensively about how to pay off debt and how to make extra money.
In this article Im going to show you how using SoFi, a popular student loan refinancing company, helps you pay off your student loans early, saving you thousands of dollars in the process!
Interest Rates On Student Loans Vs Personal Loans
Interest rates for personal loans can sometimes be lower than interest rates on private student loans , but not always. The only time you’ll actually save money by using a personal loan to pay off your student loans is if you’re definitely receiving a lower interest rate on the loan.
Some lenders have tools you can use to estimate what loans you qualify for and what your interest rate is likely to be. Prosper Personal Loan, for example, has a rate tool that can show you how much you’ll qualify for, what your monthly payments will look like and how much you’ll pay in interest, all without hurting your credit score. This can help you get a preview of what’s to come if you do decide to submit an application.
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5% of monthly payment amount or $15, whichever is greater
Terms apply.
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Best For Good Credit Sofi
Getting a personal loan from SoFi is like flying first class: it provides the best experience, but not just anyone is invited.
Fixed rates from 5.99% APR to 19.63% APR . SoFi rate ranges are current as of July 30, 2021 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, income, and other factors. See APR examples and terms. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
Check Your Personal Loan Rates
Answer a few questions to see which personal loans you pre-qualify for. Its quick and easy, and it will not impact your credit score.
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In this article
How To Pay Your Car Loan Off Early
Before completely paying off your car loan, review your options to see which one makes the most sense for your financial situation, like:
- Pay off the full amount. In order to pay off the entire remaining balance, it may require a few hundred or thousands of dollars to be paid at once, depending on how much is left on your car loan balance.
- Pay a partial payment. If you got a bonus at work or maybe sold something for a hefty chunk of change, you can use that money to make a large partial payment on your car loan.
- Boost monthly payments. If you got a raise at work or a new side hustle, you can increase your monthly payments in increments. This will reduce the number of monthly payments you need to make to repay your car.
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Can You Skip A Month On Car Payment
Ask Your Lender to Skip or Defer a Car Payment
This means that you may not be required to make the monthly payment. Instead, the amount due will be delayed until the end of your loan. Also, each lender may have a different type of deferment policy and the number of times you can defer a payment may vary.
How Does Sofi Work
The process is simple.; Once you create an account , it only takes 3 steps to get the job done:
If you just want to check and see what you can qualify for, you can simply create an account, fill out some basic info, and quickly find out what your options are without going through a huge application process.; It literally takes 2 minutes!
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How To Deal With Prepayment Penalties On An Existing Loan
If you already have a loan but are not sure if it includes a penalty clause or not, then it is the right time to check your closing documents, loan coupon book, account statements and other communication that you might have received from the lender. If you are still not sure, you should ask your lender.
In an event when you have already accepted a loan with a prepayment penalty, there is nothing much that could be done. However, you can put your best foot forward by knowing about the actions which will trigger this penalty, and doing your best to avoid them.
You can talk with your lender to discuss the involved mathematics. Then, do some calculations to find out what it will cost you if you get it refinanced or pay it off early. If this helps you in saving the money in the long run, you should go for it.
Sofi Loan Rates Fees & Other Terms
Category Rating: 5/5
- Overall APR range: SoFi personal loans have an APR range of 4.99% – 19.63%. SoFi loan rates are fixed, so you will keep the same interest rate until your loan is paid off.
- How rates are determined: Each borrowers individual rate will depend on their credit score, income, and existing debts, among other factors.
- Fees: SoFi does not charge any fees. There is no origination fee to process the application and no early repayment fee. SoFi does not have any fees for late payments, either.
- Loan amounts & timelines: SoFi offers personal loan amounts between $5,000 and $100,000. Their payoff terms range from 24 to 84 months.
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Will Paying Off A Loan Early Hurt My Credit Score
It might. Once you pay off your personal loan, it will be considered a closed account on your credit report. If closing that account reduces the diversity of your credit portfolio or shortens your payment history, you may end up hurting your credit score even though youre saving money on interest.
However, closing an account is inevitable. You wont be paying off your loan forever, so consider what other accounts you have open. Make sure you have a healthy mix of open accounts and long payment history to offset the closure of your current personal loan.
Case study: Vincent compares his loan prepayment options
Vincent recently inherited a large sum of money and wants to pay off a few loans hes taken out over the years, but he isnt sure if paying them early will be worth the expense.
He creates a small chart to compare his outstanding loans and calculate the interest hell save.
| <br>Amount borrowed |
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If You Have Lots Of Credit Card Debt
No, paying off your student loans early is not a good idea.
If you have credit card debt, paying off your balance should be the priority before turning to your student loans. While student loans can have high interest rates, credit card interest rates can be staggering. The average credit card interest rate is 16.97%, as of September 2019.
With such high rates, youll probably save more money by paying off your credit card debt first than if you focused on your student loans. Take a look at how much youd pay interest on your credit card debt and student loans over the course of 10 years:
| ; | |
|---|---|
| 4.53% | $743 |
| Interest paid is based on $10,000 total for all loan types paid over a 5-year term. Federal student loan rates are accurate for the 2019-20 academic school year. |
Keep in mind, though, that your credit card interest rate and loan APR are specific to you. So, do your own calculation to see what makes the most sense for your situation.
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What Services Does Sofi Offer
In addition to its initial student loan refinancing services, SoFi now offers personal loans, private student loans, mortgages, investment products, and SoFi Money, which is the equivalent of a high-yield savings account .
Once you have a SoFi account, its super easy to access the companys various services.
Lets take a closer look at each one of these services.
Sofi Personal Loan: A Review Of How It Works
In todays world of revolving debt and credit, personal loans are plentiful. Yet, SoFi is one of the most popular lenders among millennials and the upcoming Generation Z.
Started in 2011 by a Stanford graduate, SoFi is a leading online agency that specializes in student debts, refinancing, and restructuring. However, they do offer other types of loan products including mortgages and personal loans.
With a mission to help people reach financial independence, SoFi has a cult following beyond belief and as of 2020 has funded more than $50 billion in loans but, with such popularity some newcomers may wonder if SoFi is a tool for growth or another company fueled by social media hype.
Below well dive deeper into SoFis offerings and provide some knowledge to help you make the best decision.
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When To Prepay Student Loansand Why
Were here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey.Read moreWe develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide.We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right.Read less
You may be wondering whether it makes sense to prepay student loans. The answer, not surprisingly, is that it depends. It depends upon your current financial situation, as well as your projected one. In general, there are three main issues you may want to consider:
;;;Your cash reserves;;;The cost of your debt;;;The expected return on any investments
Your cash reserves are simple to understand and can be broadly summarized by your answers to the following questions:
;;;Do you have enough cash saved up for unexpected bills? A commonplace goal is to hold six to 12 months in cash or very liquid, safe securities for an emergency fund.;;;If you lost your job, would you have enough cash reserves to find another one that you wanted?
Fyi: Most Student Loans Survive Bankruptcy
Lets say youre making headway on student loan payments but face a crisis and consider filing for bankruptcy, thinking thats one way to get your loans off your back. But student loans arent typically discharged if you file for bankruptcy.
In fact, to attempt to have a student loan discharged in bankruptcy, the borrower must file for an adversary proceeding, requesting that a bankruptcy court find that repayment would impose an undue hardship.
Bankruptcy courts do not use a single test to determine undue hardship. According to the U.S. Department of Educations Financial Student Aid office, bankruptcy courts typically look at three factors to determine if requiring you to repay your loans would cause an undue hardship:
;;If you are forced to repay the loan, you would not be able to maintain a minimal standard of living.;;There is evidence that this hardship will continue for a significant portion of the loan repayment period.;;You made good-faith efforts to repay the loan before filing bankruptcy.
In an adversary proceeding, borrowers must present evidence showing that they meet the undue hardship standards while lenders present opposing evidence. The proceeding can be invasive and expensive for borrowers and rarely results in discharge of all debt.
Bankruptcy judges have a lot of discretion in determining eligibility. In many cases, borrowers will be required to repay their loans but with different terms, such as a lower interest rate.
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Discover Personal Loans Vs Lendingclub
- on LendingTree’s secure website
If you cant meet Discovers eligibility requirements or want a cosigner on your loan, LendingClub is a good option for a personal loan. Compared to Discover, LendingClub only requires a minimum credit score of 600 and no minimum income to qualify. Through this lender, you can borrow up to $40,000 with APRs between 8.05% to 35.89%, and you will be able to pay the loan back over three or five years. However, funding at LendingClub does take longer, averaging at least seven days.
Your Money Might Be Better Used Elsewhere
Paying off your car loan early frees up a good chunk of extra cash to keep in your pocket. But its important to also look at how much youre paying monthly for other debts that might be costing you more. Which one has the highest interest rate? If your car loans rate is low compared to other types of debt, like credit cards, consider paying off the debt with the highest interest rate first. That way you save more on total interest owed.
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Do Have Savings Set Aside
Prioritizing a safety net before extra personal loan payments can keep you financially secure if a surprise expense crops up, says Tara Tussing Unverzagt, a California-based certified financial planner.
Your savings are there to protect against worst-case scenarios, like losing your job, a medical emergency or home repair. One rule of thumb for emergency savings is to keep three to six months expenses on hand.
Unverzagt says taking a small amount out of savings to send a final personal loan payment a month or so early might work out fine. Just avoid taking so much or so often that youre left vulnerable in an emergency, she says.
Can Student Loans Be Forgiven After 10 Years
The Public Service Loan Forgiveness program discharges any remaining debt after 10 years of full-time employment in public service. Term: The forgiveness occurs after 120 monthly payments made on an eligible Federal Direct Loan. Periods of deferment and forbearance are not counted toward the 120 payments.
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How Do You Apply For A Sofi Personal Loan
The best way to apply for a personal loan with SoFi is through Acorn Finance. Acorn Finance offers a secure platform that you should take advantage of. Acorn Finance partners with multiple reliable lenders such as SoFi. If you have credit challenges we strongly encourage you to apply with Acorn Finance.
Acorn Finance offers personal loan solutions for all credit types. You can submit one application through Acorn Finance that will not affect your credit score. Within seconds you can receive multiple personalized personal loan offers. This gives you the opportunity to compare rates, terms, and offers and select the one that is best for your needs. Personal loans can be used for just about anything including home improvement and debt consolidation.
Follow the three simple steps below to get started with SoFi:
Step #1: Complete and submit a short loan application online
Step #2: Receive multiple pre-qualified offers from Prosper and more
Step #3: Get connected with lenders to obtain your pre-qualified loan
