Can You Pay Off a Secured Loan Early?

While it might seem helpful to pay off a secured loan early, doing so can in some cases be harmful to your credit score in the long run. You may want to pay off a loan early, so you have the peace of mind that the debt is repaid. However, doing so may have some possible drawbacks, including early repayment charges and potentially negative effects on your month-to-month income.

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Read Doddler’s quick guide on how to pay off a loan early in the UK, whether you should do so, and what the potential advantages and disadvantages are.

Can I Pay Off a Secured Loan Before It Is Due?

First, it depends on what type of secured loan you have borrowed, how much money, and with which lender. Often, with unsecured and personal loans , you can contact the direct lender and ask to change the repayment period you agreed to if you wish to repay your loan early.

If they allow and agree to early repayment, they may allow you to do so. In some cases, they may charge early repayment charges (ERCs), while others may not.

However, you must have a plan in place to ensure you can repay the lump sum amount alongside any interest that applies. While repaying a loan early may help you become debt-free faster, it might have a negative effect on your credit score in the long run.

Before you decide to repay a secured loan early, you must consider all of your personal financial circumstances beforehand.

How Do You Pay Off a Secured Loan Early?


If you’d like to pay off a secured loan early, you must keep in mind that your direct lender might charge you extra for this. And in some other cases, the lender may not allow you to repay a loan early.

When you take out a secured loan, you will have agreed to a repayment period with your lender. By asking a direct lender to pay off a secured loan early, you might be subject to higher interest rates and possible early repayment fees. This is because changing the original contract and repayment terms may come with exit fees and additional charges.

The lender may be able to assist you and may provide you with an alternative repayment period so you can repay your secured loan early. In some cases, they may offer a short-term loan rather than a longer-term loan arrangement. Be sure to ask about any fees that may apply.

If the lender allows early repayment, they will provide you with a modified repayment plan. This will include the total amount or monthly instalments. Additionally, it will include the interest and due date or dates

Does Paying Off a Secured Loan Early Hurt Your Credit Score?

You might still be thinking: isn’t paying off debt early a good thing to do?

Paying off a personal secured loan early might not be beneficial for you long term, especially for your credit score. There are a variety of reasons why this might occur, so we’ve put them into a short list below to try and explain a little better:

  • Credit Mix: A credit mix is representative of how many types of lines of credit you currently have. Having a varied credit mix, such as managing a personal secured loan, student loan, or mortgage, may help build your credit mix. By paying off a personal loan early, you might suddenly impact your credit score and mix.

  • Payment History: Having a payment history will help your chances of securing not only loans in the future but other bills and finances too (like mobiles, cars, etc.). If you stop a loan repayment suddenly, this might pop up as a red flag to future lenders.

Generally, paying off a secured loan early is possible, yet it might have an impact on your current credit score. Paying off a secured loan early might suggest to lenders that you suddenly closed an account, which might suggest you are a riskier borrower.

When Should I Consider Paying Off a Secured Loan Early?

You might still be wondering whether you should pay off a secured loan early and when it would be applicable to do so.

While it is generally advised to stick to your repayment period agreed with your direct lender, it may still be possible to repay a secured loan earlier. Consider early repayment if:

  • You Want to Save on Interest: In some cases, you will save money by paying off a secured loan early, as it will mean you avoid future interest payments. Particularly for personal loans with high interest, biting the bullet and paying early repayment fees might help you financially. However, you must be able to afford to do this fully.

  • You Aren’t Charged Pre-Repayment Penalties: If your lender doesn’t charge early repayment fees, then doing so might be beneficial. However, this is not often common in the UK, so always be sure to check the contract before asking.

  • You Have Financial Flexibility: If you are more financially secure and have the flexibility to do so, then paying off one personal secured loan won’t be particularly harmful to you in the long run. By doing so, it’ll free up some immediate spare cash, which could be paid towards other expenses.

Is Paying Off a Secured Loan Early Worth It?

Generally speaking, people tend to stick to their personal secured loan repayment periods that they initially agreed to with their direct UK lender. However, in some cases, lenders may allow borrowers to repay early, thus changing their repayment period.

If you have found yourself in a contract with long repayment periods and high-interest rates, then it might be beneficial for you to repay the secured loan early. Conversely, sticking to a repayment plan and budgeting accordingly may help your credit score in the long run.

Author Maggie Clarke
Maggie Clarke Content Ops Lead
Maggie leads the content operations team at She is an expert on personal finance, by way of a lifetime of gathering practical knowledge on what to not do with your pocketbook. When not blogging about money, Maggie can be found rambling through the roughest terrains. She considers herself charming yet troublesome and would love to meet you someday, just not today.
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