8 tips to help pay off a loan early


It’s amazing the difference that a few extra repayments can make. In the beginning, loan repayments can seem insurmountable, but small efforts can have a cumulative effect, knocking months or years off your loan and saving you thousands in interest.

While there’s no silver bullet for paying off your loan faster, there are several simple measures you can take which, when put together, can make a significant difference to your repayments. Here, we share eight practical tips on how to pay off loans faster.

#1: Change your monthly repayments to weekly or fortnightly


The default for most loans is to make monthly repayments, but most of the time, you can choose to make repayments fortnightly or weekly instead. This doesn’t mean you’ll need to pay twice as much — you can pay the same amount you normally would in a month over two fortnightly payments — but it means you’ll repay a full month’s worth extra over the course of a year.

There are 52 weeks or 26 fortnights in a year, but only 12 months.

  • 12 monthly repayments of $2,000 = $24,000
  • 26 fortnightly repayments of $1,000 = $26,000
  • 52 weekly repayments of $500 = $26,000

In a year, you’ll make 26 fortnightly half-payments which will equate to 13 months full payments – or a full extra payment than you would’ve made in a 12-month year – spread out over the entire year.

If you get paid fortnightly, setting up a fortnightly loan repayment for a day or two after your pay goes in is a simple way to make this happen.

Using this method can significantly reduce your loan term and the interest you pay over the course of the loan.


#2: Make one extra payment each year


If you’d rather not make weekly or fortnightly payments instead of monthly ones, you can achieve the same result by making one additional payment each year. An easy way to do this is to make that repayment when you get your tax return, a bonus from work, or any other extra cash injection.

This ensures consistent progress towards debt reduction and capitalises on infrequent financial boosts to make a substantial impact on your loan balance.

This method shares the same principle as more frequent payments, i.e. the notion of applying extra funds directly to your principal debt. In the end, you’ll have a shorter loan term and a reduction in the overall interest accrued over time.


#3: Refinance your loan


If interest rates have dropped since you took out your loan, or you’re not happy with your current rate, refinancing could be a simple way to decrease the cost of your loan and pay it off sooner.

Refinancing involves getting a new loan with more favourable terms, which often includes a lower interest rate. This adjustment can lead to significant savings over the loan's lifespan, allowing you to allocate more of your payments towards the principal amount and less towards interest. Ultimately, you accelerate the rate at which you're chipping away at the actual debt.

Refinancing can also extend to changing the loan’s duration. Opting for a shorter loan term could translate into higher monthly payments, but it will help you clear the debt much faster, with less interest paid overall.


#4: Consolidate your debts


If you have multiple debts, it could be worth consolidating them into one loan. This involves taking out a loan to cover all your current debts and paying them off, meaning you then only have the debt consolidation loan to repay.

By opting for debt consolidation, you can eliminate the complexities of managing multiple creditors and staggered repayment schedules. Not only does this make your life easier, but it could also result in a more affordable monthly repayment, easing cash flow issues or enabling you to pay off the loan faster.

Consolidating your debts could also lead to reduced interest rates and fees, depending on the terms negotiated for the loan. This could translate into cost savings over the repayment period — plus, the consistency of repaying a single debt will help you maintain a clear overview of your financial progress.


#5: Round up your payments


Rounding up your scheduled payments to the nearest $50 or $100 is an easy way to boost your repayments without impacting your daily budget too much. For instance, if your monthly loan repayment is $270, round it up to $300. That extra $30 equates to less than $10 a week, so you’ll barely notice the extra money going towards paying off your loan.

The beauty of this technique lies in its subtlety. You’re infusing a modest but steady stream of extra funds into the reduction of your principal debt — over time, this practice compounds, leading to faster debt repayment.


#6: Use an offset bank account


If you’ve chosen a mortgage with an offset account, you can use it to minimise the amount of interest you pay on your loan. This means your repayments will pay down more of the principal amount of your loan – and of course, you’ll be charged less in interest.

Keeping money in your offset account essentially reduces the amount of money left on your loan balance. As an example, for a 100% offset, if your mortgage balance is $400,000 and you have $50,000 in your offset bank account, you’ll only pay interest on $350,000.

Learn more about Gateway’s 100% Offset Account and how we can help reduce your interest costs.


#7: Avoid extra repayment fees


It’s important to note that not all lenders will let you pay off a loan early – or at least, not for free. Some lenders will charge fees for additional loan payments to prevent you from paying off your loan sooner (and early repayment fees for loans paid off in a lump sum).

At Gateway Bank, we’re a member-owned bank, which means we’re genuinely committed to helping our members pay off their loans sooner – so our loans offer fee free and unlimited additional repayments.


#8. Use an extra payment calculator


Figure out how much you need to pay extra each month to reach your goal. An extra repayment calculator can give you an instant overview of the impact an extra payment will make over the life of your loan. Arming yourself with this information can help motivate you to stick to your loan repayment schedule.

Our handy Extra Repayment Calculator can help you understand the impact extra contributions make to your loan. Just enter the loan amount, payment frequency, interest rate and extra contributions to see the time and interest saved over the life of your loan.



Will paying off a personal loan early impact my credit score?

No, paying off a loan early does not impact your credit history or score. However, paying off a loan early proves that you’re financially responsible, able to manage your money and pay your debts while also reducing the amount of debt you need to pay over the lifetime of your loan.


Why should I pay off my loan early?

When you take out a mortgage or personal loan, the interest on that loan is calculated daily, and usually charged monthly. That means, the longer it takes to pay it off, the higher the overall cost of your loan. The sooner you can pay off your loan, the less interest you will pay and the cheaper it will work out for you in the long run.


What should I do if I can’t repay my loan?

If you’re experiencing unexpected hardship or find you can’t keep up with your repayments, speak to your bank or loan provider immediately. The sooner you seek help, the easier it will be to get your finances back on track.


Find out how easy it is to pay off a loan sooner with Gateway

Whether you’re looking to pay off a personal loan or home loan sooner, Gateway offers a range of loans and bank accounts that can make it happen. From 100% offset accounts to green home loans with low interest rates, we can help you pay off your loans sooner.

Contact us to discuss the options.