Ignoring why I would do so, I am wondering if it is possible to take out a personal loan (at, say, ~6% annual interest) and then pay back the principal + any interest back within a short time (within a month)? Basically, do loans allow for faster-than-scheduled repayment?
Asked
Active
Viewed 1.7k times
8 Answers
88
It will depend on the terms and conditions of the loan you take. Some loans have penalties on early repayment while others do not.
Eric
- 3,652
- 17
- 20
23
"Immediately" per the title, mortgage refinance loans and many other consumer loans are covered by the Truth in Lending Act providing a Federal 3 day "right of rescission", where you can cancel the loan within 3 days and owe nothing.
Pennsylvania separately provides a 3 day right to rescind for any contract over $25 where a salesperson called or came to your house.
user662852
- 8,429
- 1
- 17
- 38
13
I think you're describing credit cards.
It's literally a 30-60 day (depending on when you make the purchase) interest-free loan that you should pay back on time to avoid interest.
If not credit cards then a HELOC (Home Equity Line of Credit).
Just about any line-of-credit loan will fit your description.
If you explicitly want a "personal loan" then you just have to read the conditions to make sure there are no restrictions on early repayment.
MonkeyZeus
- 8,813
- 3
- 25
- 49
5
This is commonly allowed on margin loans. I use this from time to time either when replacing one security with another or when selling a security to cover an expense.
The loan covers the time period between when then funds settle for the security sold and when the expense is paid for or the funds are provided for the security bought. If settled within the same business day, there is no interest due.
If you have more than $2,000 worth of stocks, mutual funds, or ETFs, in a brokerage account, there's a good chance these kinds of loans are available to you.
David Schwartz
- 10,420
- 2
- 28
- 45
2
It simply depends on the type of loan.
Typically, with a "personal loan" from a bank, yes, you can do precisely this.
I have indeed done this a couple times for various reasons and repaid the whole thing after just days, and paid only a trivial amount of interest on the whole affair (like "a dollar" or such).
So yup, no problem.
But, very simply, some loans have fees attached (no refund on the fees) and some loans simply do not work like that, you pay typically some sort of penalty if you pay off early.
Fattie
- 13,940
- 4
- 34
- 60
0
It depends on the type of loan.
A mortgage, personal loan, etc. will typically start accruing interest immediately. If you pay it back the same day, there may not be any interest, but if you pay it back 29 days later, you will likely owe most of one month's interest. Depending on your unstated goal, it may still be worth it. For instance, I recently took a personal loan from SoFi, got a bonus for taking said loan, and then paid it back a week later. I paid a week's interest but that was much less than the bonus.
If you use a credit card it is technically a loan, but there is often a grace period, and if you pay it off in that period, they don't charge interest. That's not always true, though. For instance if you are carrying a balance there is no grace period. For cash advances or balance transfers there is also no grace period and often a fee.
stannius
- 5,367
- 31
- 37
0
Yes, in fact as long as you pay in legal tender they cannot refuse your payment. It is quite common that people who intend to build a credit record open clothing accounts at big retailers buy clothes on credit and pay them off the next month.
Neil Meyer
- 437
- 3
- 12
-1
Yes! You can pay off a personal loan early, but it may not be a good idea. Some lenders may charge a prepayment penalty fee for paying the loan off early. The prepayment penalty might be calculated as a percentage of your loan balance, or as an amount that reflects how much the lender would lose in interest if you repay before the end of the loan term. The calculation method varies from lender to lender, but any prepayment penalties would be outlined in your loan agreement.
There are a number of lenders that don't charge a prepayment penalty. Typically, you'll need good to excellent credit to qualify with such lenders.
Irfan Shaikh
- 158
- 4