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Financial influencers on social media offer varying opinions on loan repayment; some argue that paying off a loan early is advantageous, while others suggest it could be a disadvantageous move. If you are confused by these conflicting views, do not worry. Here, we explain in detail whether repaying a loan early is beneficial or detrimental for you.

**Does early loan repayment boost your credit score?**
Some believe that repaying a loan early causes a rapid rise in their CIBIL or credit score. However, this is not the case. Prepaying a loan does not directly increase your credit score. That said, if you have consistently paid your EMIs on time and the loan has been closed properly, your CIBIL score may indeed improve.

**What is loan prepayment?**
Loan prepayment refers to paying off a portion or the entirety of a loan before the scheduled tenure ends. Repaying a part of the loan can reduce the remaining loan tenure, thereby lowering the total interest cost you incur.

**What are the benefits of early loan repayment?**
Repaying a loan early reduces your total interest burden and eliminates the EMI obligation sooner. It also makes it easier to secure future loans. Furthermore, the absence of EMI payments alleviates financial pressure.

**Early repayment isn't always advantageous**
Keep in mind that early loan repayment is not always the most beneficial option. Rules vary across banks and financial institutions; in some cases, closing a loan early may attract prepayment or foreclosure charges. Therefore, if you are planning to prepay your loan, make sure you fully understand the bank's rules.

On the other hand, if your loan carries a low interest rate and you can earn higher returns through investments, do not rush to repay the loan early. In such a scenario, repaying the loan immediately may not always be the right decision.

Partial prepayment is also a good option.
Many banks offer their customers the option of partial prepayment. This allows the customer to pay off a portion of the loan in advance. This reduces the outstanding loan amount and, consequently, lowers the future interest payable.

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