How to pay off a personal loan fast
The lower your balance, the less interest you pay
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With the average personal loan debt near $11,000, it’s clearly not always easy to pay off a personal loan fast. However, paying a loan off early could save you hundreds or even thousands of dollars in interest. Even if you have a prepayment penalty, paying off your debt early might mean you pay less over the life of the loan.
You can reduce your loan balance quickly by automating payments and sending in leftover cash.
Jump to insightCutting expenses or increasing your income can free up money to pay down your loan.
Jump to insightBiweekly payments and refinancing can shorten your loan term and reduce the interest you pay.
Jump to insightRefinancing can help you get a lower rate or shorter term — but only if you can afford the payments.
Jump to insightSome lenders charge prepayment penalties, so check before paying off your loan early.
Jump to insightWays to reduce your loan balance quickly
To reduce your loan balance quickly, focus on consistent payments, small wins and redirecting extra cash toward your loan.
Becca Andrews, founder of the Money Beyond Math coaching service, shared these tips for an early payoff:
- Automate your payments. “Automate your payments so they come out right after payday — less room for error.”
- Make extra payments. “Send unexpected money straight to the loan. If you spent $10 less than planned on dinner, make a quick extra payment instead of waiting for the due date.”
- Focus your financial goals. “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.”
Adjust your budget
Before you consider a more drastic measure, like refinancing, sit down and take a long, hard look at your finances so you can adjust your monthly budget. Seeing your debts and expenses clearly outlined can help you determine where to make cuts.
To save money, try to buy items on sale. Use coupons when possible and streamline your services to trim any unnecessary extras. 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.
» LEARN: How to save money for a house
Make extra payments
Whenever you can, try to make extra payments on your loan to pay it off faster. Whether you receive a hefty tax refund, that long-awaited bonus at work or a sudden windfall of cash, like an inheritance, consider applying the extra funds to your balance.
Be sure to tell your lender to apply any extra payments toward your principal.
Ask your lender to direct those extra payments to the principal balance instead of interest. This won’t lower your monthly bill, but it will reduce the total interest you pay and help you pay off the loan sooner. A loan calculator can help you figure out how much interest you’ll save by making extra payments.
Increase your income
The surest way to pay off a loan quickly is by increasing your income. You might start by asking if extra assignments are available at work or by looking into a side gig. However you do it, working more hours means bringing in more money — which you can put toward your loan.
Here are some common ways to increase your income:
- Part-time employment
- Babysitting
- Pet sitting
- Selling homemade goods
- Tutoring
- Driving for a rideshare or delivery company
- Selling unneeded items
Make biweekly payments
Instead of making one payment each month, you can 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; that’s the equivalent of 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.
Just 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.
» MORE: How to manage your money
Refinance your loan
Refinancing your loan replaces your current interest rate with a potentially lower one. If your credit score has improved since you took out your loan or 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 60-month loan into a 48-month 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.
Pros and cons of paying off a personal loan early
Paying off a personal loan early has both pros and cons.
Pros
- Less interest paid over time
- Faster debt elimination
- Lower debt-to-income ratio
- Lower monthly payments possible
Cons
- Prepayment penalties
- Reduced emergency fund savings
- Higher payments possible
FAQ
What is the fastest way to pay off a personal loan early?
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.
How does paying off a loan early affect your credit score?
Paying off a loan early isn’t bad for your credit score. Sometimes, it can help, especially if you’ve made a solid stretch of on-time payments first. That payment history is one of the most important parts of your credit score, and it stays on your report for years.
But if you pay off the loan before building much of a payment track record, you miss out on the chance to strengthen that part of your score. You might also see a small dip if closing the account shortens your credit history or reduces your mix of credit types.
Are there penalties for paying off a loan early?
Some lenders charge a prepayment penalty for paying your loan in full before the end of your term. Before you determine how to pay off your loan early, find out how much, if anything, it will cost in penalties or fees.
How can debt consolidation help people pay off loans faster?
Debt consolidation allows you to save money on your personal loans when you combine 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 only pay one, making it far easier to manage your budget.
Should you pay off your personal loan early?
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.” said Andrews. “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.”
“If your budget is tight — or just varies month-to-month — paying off your personal loan could free up much-needed breathing room,” Andrews told us.
Ultimately, the decision whether to pay off your loan early depends on your financial situation and the terms of your loan.
Article Sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- TransUnion, “Monthly Credit Industry Snapshot.” Accessed May 12, 2025.
- Experian, “How to Improve Your Credit Score.” Accessed May 12, 2025.
