Is it worth paying off my loan early with only 4 payments left?
I only have 4 payments left on my loan and have recently sold an asset so now have enough cash to pay the remaining balance.
Is there any benefit to paying off the loan fully or as I've only got a few payments left should I just continue to pay it off as normal?
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The benefit is that you don't have to pay interest for those 4 months. If your monthly payment is 00 and you have 4 payments left your pay-off amount is maybe like 80. Depends on you interest rate.
This would depend on:
Is there any prepayment penalty involved?
Assuming the interest calculation is on a reducing balance basis, the interest component in the last 4 payments would be much less [in the range of 1% of the 4*EMI left].
The hassle involved in calling up your loan servicing agent and having them make an exception processing.
Thus even though there may be no foreclosure penalty, it is still advisable to wait for few months for the loan to be paid off by itself as this would avoid you the hassle in get out of the way workflow by Bank. Remember most of the times banks are efficient in normal processing and make quite a few errors in out of the way processing. For example if its a Mortage, releasing your property title papers would get triggered automatically on normal closure, but on forced closure, someone has to initiate the process and it may get forgotten and would mean more effort for you to get it right.
Best is to leave it to be closed on its own.
So long as there is no pre-payment penalty (already mentioned that it is illegal in some states - and very uncommon in any event), and presuming it is not a front-loaded loan like a mortgage, then yes - paying it off now is better.
Unless you have no other cash handy for emergencies (ye olde 'emergency fund'), paying loans off early is always a Good Idea™, in my opinion.
Presuming you have no other loans with a higher interest rate, then paying this one off now is likely your best bet.
If this is a front-loaded loan (like a typical mortgage), then the 'early' payoff is not going to be a major savings (maybe only a couple dollars), so focusing your cash on creating/boosting an emergency fund and/or purchasing something like an IRA (for both retirement and tax purposes) would be a good choice, too.
I've done this before, to me if you have the money making two more installment payments just feels annoying.
Is there any real benefit? Probably not.
The earlier extra payments are made on a mortgage, the more effect they have on saving you money. You will still save some money by paying it all now. Take a look at an online amortization calculator and see if the difference is enough to motivate you.
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