If you have an accumulation of same day loans, then you could feel that you should try to pay them all off really quickly. This could save you money, in some cases and it could reduce any stress that you have as a result of being in debt, but it is something that you should think hard about. Consider a number of factors when you are making your decision.
Obviously the cost of a loan could be a big reason for you wanting to pay it off early. Most loans will charge interest each month on the outstanding balance and if the balance is smaller, then the charge will be lower, meaning that the cost of loan will decrease, Therefore if you pay off a chunk of the loan, then the interest charged will be lower.
However, with many loans there is an early repayment fee. This means that if you do pay off a chunk of the loan, you will have to pay a charge for this. This can sometimes just be a small admin fee, but if you are locked into a fixed interest rate or other term contract then the fee could be much larger as the lender may be trying to stop you moving to a cheaper lender or a cheaper loan that they offer. These might be particularly high with mortgage lenders. It is always wise to check and then calculate whether you will still save money by paying some off early. You should be able to contact the customer services department of your lender to find out.
For some people being in debt can be really stressful. It could be because they are worried about the amount of debt that they have outstanding and hanging over them or that they struggle to find the repayments each month. Stress is not healthy for anyone and so if something can be done to reduce it, such as paying off the debt more quickly, then this can be great. Of course, it may be necessary to take some steps in order to free up the necessary money to be able to do this. It could mean taking on extra work or working more hours or even changing jobs to a better paid one. It could also mean that you will need to cut down spending in other areas, if you can. Think about whether there are any luxury items that you buy which you could cut down on or whether you could compare prices on things that you need in order to save money that way. Some changes will be more significant than others but every place that you can cut down will make a difference to how much money you have available to pay off your loan.
Type of Loan
The type of loan that you have will also have an impact on whether it is worth paying it back early. For example, if you have a student loan, then you will only have to make repayments if your salary is above a certain threshold and any remaining balance will be written off after thirty years. This means that if you choose to repay it early, you could end up paying back more than necessary. Round three quarters of graduates do not repay their whole loan, so unless you have always been a very high earner and can guarantee that you will be until the end of your loan term, it is better not to pay it off early.
The same can sometimes happen with mortgages. It can be better to invest money and gain a lot of return compared with paying the mortgage back. This only happens when the mortgage rate is low and the return on your investment is high. It is unlikely that savings would ever earn more than you pay out on a loan, but investments can generate a good rate. This will depend on the investment of course and as investments can be risky, it is worth doing a lot of research before taking one out. Most people would take the advice of a financial advisor who would show them how well an investment had done over past years and predict how well it will do in the future as well.