Business Loans & Funding

Top 5 things to know at the end of a loan

Updated: 18 May 2022

As you approach the end of your loan, a whole world of opportunities start to open up. As well as a sense of achievement, with the extra cash you’ll soon have each month you can start making plans for your next chapter. To help you get the most from this exciting time, check out our top 5 things to know as you near the end of your loan.

Check your credit report

It’s always a good idea to check your credit report and make sure it’s accurate and up to date. However, if you’re expecting a jump in your credit score when you finish repaying, you may be disappointed. It may seem counter-intuitive, but paying off a loan can even cause a temporary dip in your score. This could be caused by a few reasons:

  • You have less variety in your credit mix. Having different types of credit often helps boost your credit score. If your loan is your only installment based account, closing your loan could lose you some points. 
  • It was your only account with a low balance. Having some accounts that are partially or mostly repaid is often good for your score. Once you’ve paid off your loan, if, for example, your only other accounts are maxed-out credit cards, you may lose some points on your score. 
  • Other factors. Lots of factors can push a score up or down, so it may just be a coincidence. For more information read Understanding your credit report.

These dips are often temporary and, according to Experian, having accounts with good repayment records on your credit file can help boost your score for years to come. 

Reassess your budget and take stock of what you’ve achieved

Paying off a debt can feel like an important milestone. With the upcoming change in your finances, take the opportunity to review your financial health and how you’re tracking against your plans. Are you ahead or behind on your annual targets? Is your cash flow where you need it to be?

If these are areas you track regularly already, look back at how the loan has impacted your business. Has the loan helped you achieve what you wanted it to? How comfortable were the repayments? Are there any other lessons to be learned? Especially if you’ve borrowed over several years, taking time for a quick review can give you valuable insights to take your business further.

Can you settle early?

Settling early can help save money that would otherwise be spent on interest. At Funding Circle, you can settle early in full at any time without any fees, and you’ll only pay interest on the time you borrow. As you approach the end of your loan and you’ve paid off most of your balance, your settlement figure may be easier for you to pay off. If it is an option for you, the earlier you settle, the more interest you’ll save. 

 Address other business debts

As well as looking to make investments, you could also consider paying off any other business debts. Particularly if you are paying high interest rates or charges, paying down and closing accounts can help reduce your costs. You could either pay them off month by month, or take a new loan to consolidate your debts into a single monthly repayment. 

Plan your next step

Once your loan is paid off, you’ll have extra cash leftover each month that you can put to good use. There’s probably a million things you could do with it, so it’s important to decide what will add the most value to your business. 

You could  invest in new equipment or hire a new supplier, give yourself or others a pay rise, enjoy the extra cash flow, or apply for a new loan to make a more substantial investment. Whatever you choose, it’s a great opportunity to make some changes in your business.

You can apply for further finance through Funding Circle for almost any purpose. Sign in to your account to see how we can help you today. 

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