Any time you borrow, you’re promising a lender you’ll pay them back by a specific time. For online loans with monthly payments, you’ll have to hit several due dates spread out over multiple months or even years.
With all these details hashed out in your online loan contract, why would you make extra payments on top of the ones scheduled by your lender?
1. Free Up Your Budget
Once you pay off your direct lender loans, you won’t have to keep making these payments. It’s as simple as that. This is a significant perk, even if you got an ultra-low APR. After all, even the best loans can take up a big chunk of your monthly income. Paying them off will mean you have a lot more wiggle room in your budget to handle other expenses. This extra cash will come in handy right about now as inflation reaches a 40-year high.
2. Potentially Pay Less Interest
Depending on your loan setup and lender, you might also save some cash. If your extra payments go towards your principal, you’ll lower the amount your interest gets calculated by. In the end, you may accrue less interest this way.
Cash advance lenders only offer this perk occasionally, so be sure to check your contract to find out how they calculate interest.
3. Avoid Late Fines
Every year, hidden fees can take a huge bite out of your budget, gobbling up a lot more cash than you realize. The average household racks up $119 in late fines alone!
Making extra payments in addition to your scheduled ones guarantees you’ll easily avoid late fines and save money.
4. Peace of Mind
An emergency cash advance can come in the nick of time, providing an eleventh-hour solution to a financial emergency. But no matter how helpful a cash advance might be, it’s still debt. Knowing you owe money can weigh heavy on your mind and cause stress.
Significant debt can have a terrible impact on your physical health and mental well-being. Even small amounts of debt can leave you feeling anxious, which can lead to headaches, stomach issues, and problems sleeping.
Removing these debts from your ledger can free your mind, delivering some sense of accomplishment and freedom from cash advance lenders.
5. Start Saving Earlier
Once you cross off your online cash advances from your budget, you can use the money you’ve been putting towards its monthly payments to build an emergency fund. A well-stocked fund should contain the equivalent of three to six months of living expenses.
This amount gives you enough cushion to handle random unexpected expenses without taking out another cash advance. It could even help you weather greater financial uncertainty, like if you lose your job or have to look after a loved one.
Check with Your Contact Before You Pay Extra
And there you have it, five benefits to paying debt off early. While these perks may sound attractive, paying extra or early payments isn’t always the answer. Sometimes, online direct lenders apply a charge for any payment you make outside its strict schedule, even additional payments.
Before you double down on debt, check your direct lender’s pre-payment policies to determine if you’ll get dinged. You’ll have to consider whether these pros are worth the price. Otherwise, good luck and pay extra!