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Click here to be directed to CashPal ️Small personal loans help spread costs, but they are easiest to live with when they do not hang around. Closing a small personal loan early can cut the total interest you pay and sometimes trim fees as well. Here we explain how early payoff works, using real numbers from Australian lenders and regulators.
Money.com.au analysis of ABS Lending Indicators shows the average new personal loan in Australia is about $22,643, with total new personal loan commitments of around $9.3 billion in the September 2025 quarter. The average unsecured personal loan interest rate is about 13.87% p.a., and the average term is roughly 35.4 months.
Borrowing close to the average amount at a double digit rate for almost 3 years means interest can easily run into the thousands of dollars. The fewer months your balance is outstanding, the less interest you pay.
People’s Choice gives a clear example on its unsecured personal loan page. A $10,000 loan over 3 years at a maximum rate of 8.99% p.a. (comparison rate 10.73% p.a.) leads to total repayments of $11,733. That is $10,000 principal, $1,483 interest and a $250 establishment fee.
The $250 fee is fixed. The $1,483 of interest is not. If the borrower keeps the loan for the full 3 years, they pay the full interest amount. If they clear the balance earlier, they avoid the interest that would have been charged in the final months.
Not all small personal loans treat early repayment the same way. Variable rate loans often let you make extra repayments or pay out the balance early without an exit fee. Moneysmart notes that this flexibility is a key feature of many variable rate personal loans, and some lenders such as BCU state directly that they do not charge early payout fees on certain products.
Fixed rate personal loans are different. Because the lender has locked in a rate for a set term, they may charge an early repayment cost. ANZ’s fixed rate personal loan guide shows a borrower with a $40,000 loan over 3 years at 7% p.a. who repays after 2 years when market rates are 5% p.a. and the remaining balance is $15,000. In that case the early repayment cost is about $159, or roughly $106 per $10,000 repaid.
Comparison services such as Econnex define early repayment fees as charges when you pay off a loan before the agreed term. They note these fees compensate lenders for potential lost interest. Econnex lists a common range between about $20 and $300 for many small personal loans, especially fixed rate products.
Before you start paying extra, check your credit contract for terms such as "early repayment fee", "early payout fee", "break fee" or "early repayment cost" so you know exactly what applies.
A simple checklist when reading your contract is:
ASIC’s Moneysmart personal loan calculator is built around three questions. It helps you see what your repayments will be, how much you can borrow and how you can repay your loan sooner. When you increase your repayment or shorten your term in the calculator, the total interest figure drops.
Lenders echo this. BCU tells borrowers that extra repayments help you pay off a loan quicker and save on interest and monthly fees over the life of the loan. Teachers Mutual Bank and several mutuals say the same and confirm they do not charge penalties for extra repayments on some products.
In practice, you can use your own bank’s personal loan calculator, or Moneysmart’s, to plug in your balance, rate and term and then test different repayment amounts until you find a faster option that still fits your budget.
The key question is whether the interest you avoid is greater than any early repayment fee.
Returning to the People’s Choice example, the borrower pays $1,483 in interest over 3 years on a $10,000 loan at 8.99% p.a. If they finish the loan about 12 months early, they no longer pay interest during that final year. Even after allowing for a modest early repayment fee on some products, the interest saving is likely to be several hundred dollars.
For fixed rate loans, the ANZ break cost example shows how to compare. David pays about $159 to exit his $40,000 fixed loan 12 months early when market rates are lower. If he also avoids a full year of interest on the remaining $15,000 at 7% p.a., that is roughly $1,050 in interest he no longer pays. In that situation, the fee is small relative to the interest saved.
Start by working out where you stand today. Use your lender’s calculator or Moneysmart’s personal loan calculator to enter your remaining balance, current rate and remaining term. Note the monthly repayment and total interest if you do nothing.
Next, model faster options. Test shorter terms or higher repayments and compare the total interest with your current path. This shows you the potential savings before you commit to any change.
If you are juggling other debts, consider whether it is better to focus on the highest rate loan first rather than simply the smallest balance.
Once you know the theory, you need exact numbers from your lender. Ask for a payout figure for a specific date. This will include your remaining principal, any accrued interest and any early repayment fee.
When you request the figure, ask the lender to confirm in writing whether an early repayment fee applies and how they have calculated it. ANZ, for example, publishes an early repayment cost brochure that shows how break costs are estimated. Other lenders, such as BCU and several mutuals, confirm on their sites that they do not charge early repayment fees on particular small personal loans.
With those numbers in hand, you usually have three options.
This is also where a lender such as MeLoan can fit in. If your current small personal loan is expensive or inflexible, switching to a MeLoan small cash loan with a lower rate and no early repayment fee, then paying that new loan down quickly, can reduce your total interest. MeLoan also offers 1 hour loans for many approved applicants, which can help when you want to move fast, provided the repayments sit comfortably in your budget.
Closing a small personal loan early removes a fixed outgoing from your budget and frees up cash each month. That extra cash can go to savings, bills or other goals.
You still need a buffer. Moneysmart encourages borrowers to balance debt repayment with maintaining modest emergency savings so they do not need to rely on high cost credit for the next unexpected expense.
For many people, the best approach is to choose a lump sum or monthly increase that speeds up payoff while leaving a basic emergency fund intact.
Paying off a small personal loan early does not by itself harm your credit score. What matters is your pattern of behaviour over time.
If you have made all repayments on time and then close the loan, your credit file will show a well managed account that has been finalised. That can be a positive factor when lenders assess your next application.
You can reduce the risk of any negative impact by avoiding multiple new loan applications at the same time and by keeping all repayments up to date until the payout clears.
It is usually cheaper if your loan has no early repayment fee or only a small one, because you avoid months of interest. If your loan is fixed rate with a large break cost, or you are close to the scheduled end date, the interest you save may not justify the fee, so you need to compare both figures.
Read your credit contract and fee schedule and look for terms such as early repayment fee, early payout fee, break fee or early repayment cost. If you are unsure, ask your lender for a written payout figure that clearly shows any fee so you can make an informed decision.
Some fixed rate personal loans allow a limited amount of extra repayments each year without fees, while others charge a fee on any payment above the schedule. You need to check your product terms or speak with your lender before increasing payments so you do not trigger an unexpected charge.
The saving depends on your balance, interest rate and remaining term, so there is no single figure. Use your lender’s calculator or Moneysmart’s personal loan calculator, enter your current numbers, then add $50 to your repayment and compare the total interest to see the exact saving.
A small personal loan that you repay in full, with no missed payments, is generally a positive signal. Lenders can see that you have managed credit responsibly and cleared the debt, which may support your next application, although it does not guarantee approval.
With years of experience under our belt, we can provide some tips & tricks to help you save
