Once you are approved for and receive a personal loan, the next goals are to buy what you need and pay the loan off on time. While making payments for your loan, you focus on getting the money in on a regular schedule until the balance hits zero. But what happens once your personal loan is paid off?
Here’s a look at what to expect after paying off loans.
Your Credit Score May Change
Will paying off a personal loan improve your credit score? Yes, and this is why many people take out personal loans in the first place and benefit from them later. However, it might not improve the score right away. When you pay off a debt, your credit score can initially decrease because your available credit drops when you close a loan account. However, if you close the loan account and continue making payments on time for other debts, your credit will soon improve.
Your Debt-to-Income Ratio Will Decrease
A benefit of paying off loans is that your debt-to-income ratio (i.e., the percent of your monthly income applied toward debt payments) will drop. When you cut a debt out of your life by paying it off, this number lowers, which makes you look more financially responsible to lenders.
You Can Get Back on Track
Once you’ve paid off your personal loan, you can focus on other debts in your life and start saving money again. With less cash going toward loan payments, now you can use that money to save for retirement, contribute to a 401K, or start an emergency fund.
Wrap Up Loose Ends
Before making the last payment, ensure you have the correct final payoff amount because it could be slightly different from your previous amounts. Still owing a few extra dollars on a loan you thought you'd finished paying can be frustrating and a hassle. After paying your loan off, make sure to get an official written notice that your loan has been paid in full for your own records. You may also need to cancel the automatic monthly payments you set up for the old loan.
Contact Us with Questions
If you have any other questions about how to pay off your personal loan or what to expect once it is fully paid, the teams at our branch locations are here to help. We are available for questions from start to finish throughout your loan process and value you as a lender.
Our fast and friendly loans for any purpose have helped many people get back on their feet and take control of their finances during challenging times. The day you make your final loan payment is an exciting one that we look forward to helping you achieve.