If you’re wondering, “Can I pay my Self loan off early?” the short answer is yes. But there are a few things to consider first.
While you can pay off your Self Credit Builder Account early, you don’t have to pay it off early to get your money back.
If you're not paying back the full loan early and just need to close your account now, read this FAQ instead of the rest of this article.
Here’s what happens if you do pay your Self loan off early:
Let’s look at an example:
Say you sign up for a Self loan with a 12 month term that ends in December, but you pay it off 6 months early. If you pay off the account in June, but don’t take the extra step to close it, your payout won’t start processing until the original 12 month end-date in December.
That’s a long time to wait if you want your money sooner, so be sure to take action in a way that aligns with when you want your money back.
Sometimes it may make sense to pay off a loan early. Other times, it may get in the way of your financial goals.
Watch this short video, then read on to learn more:
At Self, we want to help you build your credit so you can build your dreams. Part of doing that means building positive credit habits that will serve you for years – if not decades – into the future.
Positive credit habits include things like making your payments on time, every time, over time, to prove to lenders that you’re a responsible borrower who pays back what you owe. That’s one reason you should be wary of “quick fix” credit hacks that promise to deliver immediate results.
Some people believe that paying off your Self Credit Builder Account faster, or paying a higher dollar amount each month, helps you build credit faster. But that’s not necessarily true. Sometimes, paying off your Self account early could potentially hurt your credit.
Here are a few reasons you may not want to pay off your Credit Builder Account early:
Your length of credit history, which includes the average age of your credit accounts, is a major factor in your credit score. By paying off your Self loan early, you limit the length of credit history that gets added to your credit report.
I once saw someone open a Credit Builder Account, pay it off almost immediately, then open another Credit Builder Account right after. They did this multiple times in a row, hoping to increase the credit limit on their Self Visa® Credit Card faster.
Instead, their credit score went down.
Instead of having a one- or two-year loan on their credit report, they had multiple short-term loans of three months or less that shrank the length of their average credit account history.
Once your Credit Builder Account is closed, we will no longer report monthly activity to the credit bureaus (since there won't be any more activity). Instead, we will report your account as closed, paid as agreed.
While fulfilling the terms of your loan agreement with Self adds positive history to your credit report, paying the full length of the loan adds more credit history than when you pay it off early.
Have the Self credit card but paying off your Credit Builder Account early? As long as your card is open, we’ll continue to report your card usage to the credit bureaus after your Credit Builder Account ends.
Learn more about how credit reporting works at Self.
Payment history is worth 35% of your FICO credit score, making it the biggest of the major factors that impact your credit.
If you pay off your Self account at 3 months instead of 12 months, for example, you miss out on 9 months of payment history you could build through Self.
If you close your account too soon, you may miss your chance to become eligible for the Self Visa Credit Card, get credit limit increases on that card, or access unsecured credit from Self later.
To become eligible for the Self credit card, you need to:
If you close your account before making 3 monthly payments or reaching the minimum required savings progress, you miss the opportunity to access Self’s secured credit builder card.
Before paying your Self loan off early, understand the impact that action could have on your credit and whether it’s aligned with the goals you’re building towards first.
Check your savings progress and credit score, track your eligibility towards the credit card and more in the Self app. Get the app or login now.
Lauren Bringle is an Accredited Financial Counselor® with Self Financial – a financial technology company with a mission to increase economic inclusion by helping people build credit and savings. Connect with her on Linkedin or Twitter.
All Credit Builder Accounts made by Lead Bank, Member FDIC, Equal Housing Lender, Sunrise Banks, N.A., Member FDIC, Equal Housing Lender or Atlantic Capital Bank, N.A., Member FDIC, Equal Housing Lender. Subject to ID Verification. Individual borrowers must be a U.S. Citizen or permanent resident and at least 18 years old. Valid bank account and Social Security Number are required. All loans are subject to ID verification and consumer report review and approval. Results are not guaranteed. Improvement in your credit score is dependent on your specific situation and financial behavior. Failure to make monthly minimum payments by the payment due date each month may result in delinquent payment reporting to credit bureaus, which may negatively impact your credit score. This product will not remove negative credit history from your credit report. All loans subject to approval. All Certificates of Deposit (CDs) are deposited in Lead Bank, Member FDIC, Sunrise Banks, N.A., Member FDIC or Atlantic Capital Bank, N.A., Member FDIC. The Self Visa® Credit Card is issued by Lead Bank, Member FDIC, Equal Housing Lender.