How to pay off your personal loan early
There are a few ways you might pay off a personal loan ahead of schedule, such as making extra payments when you can, using a debt consolidation loan and using savings when appropriate.
1. Make extra payments when possible
Even if you can’t make extra payments every month, the occasional additional payment can help you pay off your personal loan faster. For example, if you get a tax refund or another financial windfall, you may use those funds toward an additional payment to help pay down your loan faster.
2. Reevaluate your budget
Your budget is typically the key to getting out of debt. Reevaluating how much you’re spending on non-essentials, such as dining out or subscriptions, may help free up money for additional debt payments.
3. Consider a debt consolidation loan
Debt consolidation lets you shift existing debt to a new loan with new terms. For example, if you combine multiple debts, such as a personal loan and credit cards, into a personal loan with a lower APR and shorter repayment term, you may be able to save more in interest and get out of debt faster. Some lenders may refer to these personal loans as “debt consolidation loans.”
Debt consolidation can be a good option if you can save money on interest over the life of the loan. (Keep in mind that there may be restrictions. For instance, Citi does not allow customers approved for a Citi Personal Loan to use the funds to pay off existing Citi credit cards.)
In general, the better your credit, the more likely you are to qualify for a lower interest rate on a personal loan.
4. Use your savings (wisely)
You can tap into your savings to make extra payments on your loan. That said, remember to leave yourself a cushion with an emergency fund.
An emergency fund can help you manage unanticipated expenses without taking on more debt. In general, experts recommend saving enough to cover 3 to 6 months’ worth of necessities. For example, if your monthly expenses amount to $4000 a month, then your emergency fund should be between $12000-$24000. Ensure you have enough in this emergency fund before considering using your savings to pay off a loan early.
5. Look into bi-weekly payments
Aligning your personal loan payments with your paychecks (if you’re paid bi-weekly) or simply spacing them out every 2 weeks to avoid the sting of larger monthly payments may help you pay off your personal loan faster as long as you pay more than your required payment.
Keep in mind that you’ll still need to meet your required monthly payment amount by your due date to avoid a negative credit impact. However, if you can afford to pay extra, and do that consistently, you may pay off your loan early.
Reasons to pay off a personal loan early
Benefits of repaying your loan early can include:
- Saving on interest: Paying your loan off early can mean you’ll pay less in interest overall.
- Reducing debt: Paying down debt may decrease your monthly payments, enabling you to put your money toward other things, like savings and travel. It may also mean gaining financial peace of mind.
- Lowering your debt-to-income ratio (DTI): Lenders consider your DTI (the percentage of your pre-tax income that goes toward debt payments) when you apply for loans or credit. Paying off existing debt may help you qualify for better terms and rates.
If you’re interested in debt consolidation, Citi offers flexible, fee-free personal loans to qualified applicants. If you think you could benefit from a Citi Personal Loan, apply online today.
A key thing to note here is that it’s important to read the loan agreement or contact your lender to find out if your loan has a prepayment penalty. If it does, you’ll need to run the numbers to see if paying off your loan early can still save you money. You may decide to pay the loan off ahead of schedule anyway, but it’s important to know exactly how much you’ll pay.
Reasons not to pay off a personal loan early
There can be drawbacks to repaying your personal loan early, including:
- You may use up your savings: Depleting your savings to pay off a personal loan early can cause problems later. Not having an emergency fund may mean taking on more debt later if you’re hit with unanticipated expenses.
- You have other high-interest debt: If your other debts have higher interest rates than your personal loan, it can make sense to pay those off first. You’ll generally save more in interest if you focus on paying off the higher-interest debt while continuing to make on-time personal loan payments.
- Prepayment penalties: Though not all lenders charge prepayment penalties, be sure to check if yours does. If so, it may make more sense to tackle a different debt instead.
Paying off personal loans early can be a useful option for saving money on interest payments. Once you understand if it makes sense for you, you can decide on a path forward, whether that’s taking out a personal loan to consolidate debt with a shorter term, making additional payments when you can or putting extra money in your emergency fund.
This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
1 Rates as of 9-30-2025. Your APR may be as low as 9.99% or as high as 19.49% for the term of your loan. The lowest rate quoted assumes excellent credit, a loan term of 36 or 48 months, and includes a 0.5% APR discount for enrollment in automatic payments at the time of loan origination. Your APR will depend on a variety of factors including your creditworthiness, term of loan, and existing relationship with Citi. Citi offers personal loans with a period of repayment between 12 and 60-month terms. For example, if you borrow $10,000 for 36 months at 15.99% APR, to repay your loan you will have to make 36 monthly payments of approximately $351.52. Existing Citi banking Relationship Tier customers will receive an additional 0.25% discount on the APR. If you are in default, your APR may increase by 2.00%. Rates subject to change without notice.
