When you’re looking at a business loan, you’re normally looking at a fixed-term prospect. A business loan is based on a set repayment schedule over an agreed period of time. So we’d like to talk about a question we sometimes get. Can you pay back your loan early?
Every business would love to pay back their loan early. It’s not an unattainable goal – there are sometimes mechanisms in place to allow for early repayment on a loan. However, doing so isn’t always as simple as just making larger payments to the bank. There are two main considerations – overpayment limits or early payment charges, depending on the lender.
Overpayment limits are exactly what they say on the tin. For example, some loans might allow you to pay off 10% of the loan each year without any penalty. You won’t be able to repay large chunks of your loan at once under overpayment limits, but they aren’t subject to any extra charges or fees.
Early payment charges are when a lender charges a fee or penalty if you were to repay all or part of the loan balance off early.
So, whether you want to overpay might have a bearing on the right loan for your business. Finding out which loans might work for your business is another of the many reasons it’s always worth having a broker on your side. If you’re looking for a loan with a mind to paying it back early, it’s certainly possible – but always talk your options through with your broker first!