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.
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:
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.
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.
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.
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.
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.