Pay off loan faster

Taking out a loan is a financial commitment, and it pays to take that seriously. Although, as a borrower, you agree to a loan term with their lender at the point of taking out the loan, you can often repay faster if you are able.

A good lender shouldn’t penalise you for repaying your loan earlier through early repayment penalties, for example. So, providing you’ve taken out your loan with a responsible leader, you can save money by paying off your loan more quickly than your loan term requires.

So how do you go about paying off a loan faster? There are some steps you can take and tips you can follow to make this easier. Here’s our guide.

Why is it good to pay off your loans faster?

Firstly, let’s look at why paying off a loan faster is a good idea. When you take out a loan, you generally pay interest charges for every single day you have an outstanding balance. If you can reduce the amount of time you owe your lender money, you can reduce the amount of interest you have to pay them.

Can a lender stop you paying off a loan early?

Lenders can charge you something called an ‘early repayment penalty’ for paying off your debt sooner than your stated term. This covers the losses they incur as a result of you saving on your interest payments. Cheeky, right?

A good, responsible lender will never apply these types of charges to your loan. Always make sure you check what fees and charges apply before you sign up for a loan.

Paying off loans early – general tips

  • Pay off your most expensive loans first

Take another look at the fees and interest charges you are paying on each of your debts. Focus your attention on paying off the most expensive loan first. This will be the most cost-effective approach and will minimise the interest you are paying on your debts.

  • Repay before you save

It’s always better to prioritise paying off debt over putting money into savings. This is because the cash you lose in interest charges will usually exceed any gains you will make in interest from your savings account. In short, having debts costs you more money than you can generate from savings. Therefore, whatever money you have spare each month, use it to pay off your loans faster and you will be quids in.

Top tips on paying off a personal loan early

Personal loans come in different shapes and sizes. For example, short-term loans tend to be high-interest loans that are available very quickly to borrowers in need of emergency funding. Longer-term personal loans are paid off over a longer period of time and, while interest rates are lower, the total repaid can be more than with a short-term loan due to the length of the repayment term.

Whatever your loan term, paying off your personal loan faster will save you cash. Here’s how to do it:

  • Overpay as much and as often as you can

If you find yourself in a position to pay off a little more of your personal loan than is due, don’t hesitate to overpay. Whether you are scheduled to make repayments weekly, with a payday loan, or monthly with an instalment loan or longer-term personal loan, your lender should accept overpayments and these should bring down your interest charges. You are usually charged interest on your outstanding balance. The smaller this balance is, the less you will be charged in interest.

You may need to make a call to the customer service team to overpay, which is usually because you will be repaying through a direct debit or recurring payment authority arrangement, set at a certain amount.

Some lenders may be elusive about overpayments and how they should be made. FAQs on their website is a good place to start to find out this information, but don’t be afraid to call if it’s not clear.

Ways to make overpaying easier

  • Pay more often than is required

If you are scheduled to make monthly repayments, make a mental note to try to make a payment every fortnight instead. It’s often easier to budget your money if you are making smaller, more regular payments than when you are trying to budget one a month. You may find it’s easier to repay more than you owe if you make payments more regularly, as you will notice the impact of the payment less.

  • Round up your payments

Another good way to make overpaying easy is to round up the payment you make to the nearest ten pounds or even five pounds. If you’re trying to repay a small short-term loan with high-interest charges, bringing down your outstanding balance by just a few pounds a month can make a significant difference to the amount of money your loans will cost you

How to pay off your home loan faster

Home loans usually take the form of mortgages, which are major long-term financial commitments that can cost a small fortune in interest charges. Most people pay off hundreds of pounds per month in interest on their home loans. The quicker you can pay off your home loan, the lower the amount you repay in interest will be.

Interest on mortgages is usually worked out as a percentage of the outstanding balance. Therefore, the interest charges reduce over time, as you chip away at the amount you still owe. The quicker you can reduce the outstanding balance, the better.

  • Watch out for early repayment penalties

Although many mortgages do come with early repayment penalties, many don’t so do your research when taking out your mortgage in the first place to avoid them.

Also – if you already have a mortgage with early repayment charges, you may still save money by overpaying on your instalments, but you may need professional advice from a mortgage adviser or accountant to find out whether overpaying is still worth it.

Quick tips of how to pay off your home loan faster

  1. Put every spare penny into your repayments
  2. Remortgage to a shorter-term mortgage so you have no choice but to repay quicker
  3. Redirect any bonus payments or windfall cash to repay your mortgage
  4. Schedule an extra payment every year, six months or quarter

How to pay off car loans faster

Another common loan type many people in Australia hold at one time or another is a car loan. Car finance helps people to pay for their vehicle over a number of years, but they get to use the car while they pay off the loan. If you are often wondering how to pay off an auto loan faster, here are our top tips:

1. Look to refinance your car loan to get a better deal

Refinancing your car loan can save you money and help you to repay your auto loan faster. A new deal could offer you a cheaper loan if your credit score has improved, for example. If you are in a better financial position than you were when you first took out the loan, you could also opt for a shorter loan term this time round and repay the car loan much faster, saving even more in interest charges.

2. Regard the car as your biggest luxury

And cut down on other luxuries to help repay your car loan faster. Taking out a financing deal to buy a car helps you get your hands on a better vehicle, but it’s not an essential debt. Remember that paying off your car loan is a priority and cut back on other luxuries in order to help you repay faster.

3. Boost your income to help repay your car loan faster

If you’re serious about repaying your car loan faster, try to earn some extra money to help you make larger payments than your loan terms require. Options include working overtime, taking on extra shifts or even working in the gig economy in your spare time. Once the car is paid for, you can enjoy the freedoms and extra cash that brings.

Repaying loans faster is always a good idea and can help you regain control over your finances more quickly. Debt isn’t always avoidable. We understand that most people need a little financial boost at some point in their lives, whether it’s to meet emergency costs or simply to help make large, necessary purchases like cars and homes. However, clearing debt should always be a priority overspending on unnecessary things or putting money in savings. There will be plenty of opportunities to build up a safety net once you’re debt-free and carefree!


If you are really in need of quick cash for personal expenses, make an online application with My Cash Online today.

*Disclaimer & Example: For our Small Loans of $2,000 or less, an APR (Annual Percentage Rate) doesn't apply. These loans are fee-based only with a term between 62 and 180 days, and so the APR is 0%. The establishment fee is 20% of the amount borrowed and the monthly fee is 4% of the amount borrowed. Representative example: a loan of $1,000 repaid over 3 months equates to a total amount payable of $1,320 comprised of $1,000 principal (amount borrowed), $200 establishment fee and $120 in monthly fees. The maximum comparison rate on loans between $300 and $2000 is 199.43%.
For our Medium Loans between $2,100 and $5,000, with a term between 2 months and 12 months, the maximum Annual Percentage Rate (APR) is 48% (Comparison rate 65.6597% p.a.) and there is a $400 Establishment Fee. A Medium Loan of $3,000 borrowed over 1 year would equate to a total amount payable of $4,289 (including a $400 establishment fee).

Under the current legislation, most small personal loan providers don’t charge an annual interest rate (you’ll know this as an APR %). The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. The maximum comparison rate on loans between $300 and $2000 is 199.43%. This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

© 2023 Owned by Australian Synergy Finance Pty Ltd, ABN 54 613 655 646. Australian Credit Licence 490422. The information on this webpage is general information only and does not take into account your objectives, financial situation or needs.