The process of paying off debt is a top financial goal for many. In the end, interest is costly and paying money to an individual creditor each month isn’t a lot of fun.

If you are aspired to debt-free living, it is important to choose which loans to settle first. The first priority should be paying the high-interest debts like unpaid credit card balances, or payday loans, as soon as you can. Other types of debt come with better terms, and therefore a quick payoff might not be the best option.

If you’re in possession of an personal loan, for example that you’re paying it off in the early stages, it could be a good idea for you. However, it’s also possible you’d prefer to keep the loan and only making minimal payments. You should ask yourself these important questions to determine whether repaying personal loans in the early stages is a good idea.

What is you personal loan interest rate?

The lower the interest rate the more sense it is to pay off your loan in the early stages.

If you’re not paying a lot on interest rates, then it might not be a good idea to take care of you personal loan. If, for instance, you have a loan that has an interest rate that is high, say 5 percent but you have to pay it off earlier, it could only result in the equivalent of 5% annually. It is possible to get a higher return investing in the market for stocks.

However, if you’re in possession of an extremely high-interest personal loan, paying it in the earliest time possible is crucial. If you’re paying interest of 15 for instance, very there are a few investments that offer a higher yield than repaying the loan.

What other debts do you have?

Personal loans are able to pay lower rates of interest than other forms of loans. This is the case for:

• Credit cards
• Payday loans
• Car title loans

If you have loans with a higher interest rate, make sure you pay the debt off first. Just make the minimum amount of payments for the personal loan. The elimination of debt with high interest can save you money than repaying the personal loan.

However it’s typically better to pay off your personal loan first if your only other loan is the mortgage. Mortgages are tax-free and have lower prices than credit cards.

Do you know if you personal loan have a prepayment penalty?

Certain personal loans come with the prepayment penalty. If you repay the loan prior to the due date then you’ll be required to pay a cost. A prepayment penalty can significantly decrease any savings that result from the loan being paid off early.

Consider the penalty for prepayment versus the savings you can get by paying off your loan earlier. It could be that it’s better to continue to pay on time. If you’d be able to save a small amount of money due to the prepayment penalty, you should do something else with the extra money. You’ll likely receive a higher return on it.

What else can you make with the money you have?

There’s a risk of repaying an personal loan early. For instance, if you’re putting extra funds into private loans, you might not be eligible for an employer match to the business’s 401(k). In this instance you’d lose the possibility of a 100 percent profit on the investment.

Additionally, you can start an enterprise using the funds from which to repay the personal loan early. Entrepreneurship can be extremely profitable and you can earn an increase in return.

If you’re trying pay off the personal loan early and you don’t have a savings account for emergencies, you might have to borrow to cover the cost of something that goes wrong. The emergency loans are likely to have higher rates of interest.

Consider what you could have missed out on if you use extra money to pay off the cost of your personal loan. If you think any of these objectives could be a better use for your funds, consider prioritizing these goals.

Is the idea of paying on the personal loan early make sense for you?

There’s no clear answer on whether repaying the personal loan early makes sense. It’s a good decision if you’d rather spend money on purchases that aren’t necessary. However, it might not be the best option in the event that you’re paying higher interest debt or you can put the money into investments and earn an increase in return.

Think about what your objectives in terms of finances, financial situation, as well as the costs of the loan prior to deciding whether you should make the payment on the personal loan ahead of schedule. If you think there are better uses for your money, you could achieve with money you should continue paying the minimum for the personal loan and take other actions to improve your financial situation. The goal is to be debt free in the end and may be in a better financial standing when that time comes around.