Does Paying Off A Loan Early Hurt Credit? (2022)

Hello there brothers, sisters and everyone else in between! With my streak of loan-related articles, you may now wonder, does paying off a loan early hurt credit? Cause hey, after getting a loan a little too quickly, you might have just realized that you were a little too hasty with your decision. And you realize that you’re actually capable of paying normally!

does paying off a loan early hurt credit?

So, quite obviously, you might think that it is an easy process of returning or paying back the borrowed money immediately. Though some of you might also wonder, does paying off a loan early hurt credit scores? Well, that is why I am here, writing an article for you! So let us get right to it.

Read also: “4 Tips On How Can You Reduce Your Total Loan Cost?”

Can You Even Pay Off A Loan Early?

does paying off a loan early hurt credit?

So before you ask, does paying off a loan early hurt credit, you might want to ask yourself this too, because a lender’s money thrives on the interests they receive from borrowers. You might think that at the very least, lenders would have a certain grace period before the borrowers are allowed to pay the loan off.

But in actuality, yes! It is most definitely possible to pay off your personal loan or whatever loan you decided to get early, which is quite a fortunate thing for you! However, the unfortunate part is that this does not exactly apply to every lender. There are also certain conditions that you must follow, otherwise you might actually get penalized for formally acquiring a loan, and then immediately paying it back.

In Actuality, Does Paying Off A Loan Early Hurt Credit Scores?

Now this is a more specific question! Because earlier, it was only asked if you could pay off loans early. In which case, you most likely always could! But, I did not say anything about not getting any penalties for doing so! It is actually a very appropriate and logical question to ask, “does paying off a loan early hurt credit scores?”

Some of you guys were right! Since a lender’s money only grows and thrives from the interest it garners through time, paying it off immediately to inhibit that interest would be pretty rude to the lender! But anyway, to put it more to perspective, and to actually delve deeper into the happenings of an actual loan, you might want to know that credit or financing companies look at a combination of different factors when fully determining a person’s credit score!

Factors In: “Does Paying Off A Loan Early Hurt Credit?”

Essentially, here are a few factors that actually do affect the consumer’s credit score!

  • Payment History;
  • Current Debt;
  • Credit Age;
  • New Credit Applications.

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To be more elaborate:

Payment History – is a key part of one’s own credit history. It tells the people that monitor credit scores that you are either a person that has always done well in making payments on time, or if that person is notoriously bad at actually paying back loans.

Current Debt – people are able to actually monitor how much unpaid debt that you currently owe to people across your financial accounts. If you have too much debt, yet you are barely even doing anything to pay those back, then it already tells the credit-scoring people that you are really squandering away money with reckless abandon!

Credit Age – it tells the people that monitor your account if you are a long-time subscriber and consumer of the financial company. Or simply a new account, which could mean that they will be more cautious towards your account if ever that you were to use the said new account for scamming purposes, etcetera.

New Credit Applications – simply another factor to, “does paying off a loan early hurt credit scores?” It is a monitored statistic that views whether you have been applying for credit and if you have been doing so for a suspiciously frequent amount.


Does paying off a loan early hurt credit scores? Yes, it does! But, it is more of a mixture of multiple factors that lead to your credit score being decreased.

Though as a side note, if you have a relatively good credit score, but you unfortunately came into a circumstance where you have the option to pay off the loan early. The decrease in your credit score would most likely not affect your credit in the long run. You could say it would simply be temporary and an overall minor inconvenience.


does paying off a loan early hurt credit?

If you ever find yourself asking, does paying off a loan early hurt credit scores, it usually will most like do. But not in a manner that will affect you in the long run. Meaning, you might want to take solace in the fact that having your credit score decreased in such a case will usually only be temporary and a minor inconvenience!

Read also: “Knowing What Increases Total Loan Balance (2022)”