I have recently received some money that I could use to repay my personal loan, however I am not sure if doing that, is a better idea than continuing paying the loan normally, with instalments taken from that money which I would keep in my account.

  • 2
    What is the interest rate on your loan? What's the interest rate on the account you'd keep the money in if not paying off the loan?
    – Hart CO
    Aug 14, 2018 at 18:56
  • You have to consider the cost of interest against the benefit you will get with higher credit. I had a colleague that was going to make less than full payments to the credit card company at 18+% interest (he could have paid in full) so that he could build credit and get a card with 1% cash back.
    – A.K.
    Aug 14, 2018 at 19:00
  • @A.K. I hope you smacked some sense in to that colleague....
    – quid
    Aug 14, 2018 at 19:35

1 Answer 1


The question title:

Is it a good idea to make a lump-sum payment to pay off a personal loan, even if I want to build credit history?

Assuming that there isn't another debt with a higher interest rate...
Assuming that you have money set aside for emergencies...

Then making a payment to either completely payoff the debt or to reduce it significantly makes sense.

You don't want to pay money to try and improve your credit score. Keeping a loan that has a higher interest rate than the guaranteed rate of the account you would keep the cash in, will cost you money.

Even if the rates are close to each other, paying off the debt will help your credit score by reducing the amount of debt you have.

Paying the debt in full doesn't make the history of the debt go away. For several years after the loan is retired your credit history will still show that you paid the debt on time. Which is a good thing.

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