How to Pay Off a Personal Loan Fast

6 ways to reduce your loan balance quickly

To reduce your loan balance quickly, focus on making consistent payments and redirecting extra cash toward your loan. Here are some ways you can pay off your loan balance faster:

1. Adjust your budget to focus on loan payoff

Before you consider a more drastic measure, like refinancing, take a look at your finances and make an effort to adjust your monthly budget to focus on paying off your loan. Make a list of all of your debts and expenses so you can see where you can make cuts.

For example, you might be spending too much on groceries, dining out, entertainment or other expenses. If you can cut some unnecessary expenses from your budget, you can use the money you save to pay off your personal loan faster.

“It’s tempting to tackle everything at once — saving, investing, paying off multiple debts — but channeling extra cash toward one goal builds momentum and makes progress more visible,” said Becca Andrews, founder of the Money Beyond Math financial coaching service.

» MORE: How To Manage Your Money

2. Make extra payments

Whenever you can, try to make extra payments on your loan to pay it off faster. For example, if you receive a large tax refund, a work bonus or a sudden windfall of cash (like an inheritance), consider applying the extra funds to your balance.

“Send unexpected money straight to the loan,” Andrews said. “If you spent $10 less than planned on dinner, make a quick extra payment instead of waiting for the due date.”

If you opt for this route, ask your lender to direct any extra payments to the principal balance instead of toward interest. This won’t lower your monthly bill, but it will reduce the total amount of interest you’ll pay and help you pay off the loan sooner.

3. Increase your income

The surest way to pay off a loan faster is by increasing your income. You might consider looking for a better-paying job or else taking on a second job or side gig. However you decide to go about this, working more hours generally means bringing in more money, which you can put toward paying off your loan.

4. Make biweekly payments

Instead of making one payment each month, you may be able to switch to a biweekly schedule by splitting your monthly payment in half and paying that amount every two weeks. Since there are 52 weeks in a year, this adds up to 26 half-payments, which is equal to 13 full payments annually. The extra payment each year goes straight toward your principal, which reduces the interest you pay over time and helps you pay off your loan faster.

Before trying this option, check with your lender to make sure biweekly payments are allowed and that paying off your loan faster won’t result in a sizable prepayment penalty.

5. Refinance your loan

Refinancing your loan replaces your current interest rate with a potentially lower interest rate. If your credit score has improved since you took out your loan, or if current interest rates are more competitive, refinancing could save you money.

You may also be able to choose a shorter loan term. For example, refinancing a five-year loan term into a two-year term could help you pay off the balance faster. As long as you can handle the higher monthly payments, this can greatly reduce the amount you pay in interest.

6. Consolidate your debts

If you’ve taken out several personal loans, debt consolidation can allow you to save money by combining your debts into a single loan with a lower interest rate than the one you currently have. Instead of making multiple payments each month, you’ll only make one payment. This can make it far easier to manage your budget. You may even have lower monthly payments with one loan versus several loans.

Pros and cons of paying off a personal loan early

Paying off a personal loan early has both pros and cons.

» MORE: Pros and Cons of Personal Loans

Should you pay off your personal loan early?

Generally, if you can find a way to pay off a personal loan early, you should. Paying off a loan early doesn’t just reduce the amount of interest you pay, it can also save you stress.

“Personal loans can pack a punch,” Becca Andrews said. “Compared to credit cards with a similar balance, personal loans often come with higher, fixed monthly payments. By paying off your personal loan early, you'll avoid future interest, gain more breathing room in your budget and give yourself more financial flexibility.”

Ultimately, the decision to pay off your loan early depends on your financial situation and the terms of your loan.

Bottom line

The fastest way to pay off a personal loan early is to make as many payments as you can. You’ll pay less in interest and pay down more of the principal faster, which means your dollar will go farther. To pay off your loan faster, try strategies like cutting expenses, increasing your income or refinancing your loan term. Just check whether your lender charges a prepayment penalty before you make additional payments.