Many of us have debts and there are often people that say that we should be making as much effort as possible to repay them. However, it is important to give this some thought as, although it will normally save you money in interest, there may be disadvantages to doing it.
Might be Cheaper to Keep the Debt
Sometimes you may be lucky to have a really cheap loan. If interest rates are really low, for example, you might be better off keeping the loan, especially if you can find a savings account that pays a better rate. You will need to research this carefully and make sure that it really is cheaper to keep the loan. When you are working out the cost of the payday loan make sure that you allow for charges and fess and well as interest and ensure that you are making the required repayments and always covering those. Check how much it is to put the money elsewhere and compare. Make sure that you allow for any tax that you might have to pay of the interest, dividends or whatever you get as a result of wherever you have put the money.
Might be an Early Redemption Chard
With some loans there is an early redemption charge. This sounds really complex but basically it is a fee for repaying the loan early. Lenders often put these in because they want to discourage their borrowers to go elsewhere. Sometimes, it is just a small admin fee that has to be paid, but sometimes it is really significant sum of money. It is therefore really important to find out if there is a fee and if so how much it is. Then you can calculate how much you will save if you repay the loan early and that will allow you to calculate whether it is worth paying the fee or best to keep the loan.
Might Need the Money for Other Things
It is also worth thinking about whether you might need the money. It might be that you might need it soon or that you might need it in the future. It is wise not to pay off a loan speedily if you are not sure if you might need that money. If are too hasty then you might find that you need the money again and have to reborrow and you may not get such good rates this time. It is usually the case that it will be cheaper for you once the loan is repaid and therefore it will be in your advantage to repay it early but it is worth making sure that there is nothing obvious that you will be going without if you repay it early.
So, you can see that it is not a straightforward decision. Although it is nice to think that you could have a paid off loan and that will be great, you do need to be careful that you have thought it through. Consider the advantages of having less interest to pay and less responsibility but also think about the fact that you may need the money elsewhere and you might find there is an expensive charge to repay it early. So, make sure that you are prepared to take some to do some research before you make a decision about this. A few phone calls should be enough to help you find out about any charges and to calculate how much you will save by paying it off. However, you may need to explore your household finances in more detail to decide whether you feel you might need the money for other things.