Perhaps you’ve 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 there’s a prepayment penalty, then this loan payoff may be more costly than what you’d 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