Should I clear an expensive loan early or keep the cash buffer?

Clearing expensive debt early saves interest, but keeping a cash buffer protects you from surprises; the right call depends on the rate and how thin your reserves are. Repaying an expensive loan early saves interest, but it also drains the cash cushion that protects you when something unexpected hits. Both matter — the balance depends on your situation.

Should I clear an expensive loan early or keep

2 min read

Save interestRepay early

Keep a bufferSafety first

Weigh bothRate vs reserves

The tension

Repaying an expensive loan early saves interest, but it also drains the cash cushion that protects you when something unexpected hits. Both matter — the balance depends on your situation.

When early repayment wins

If the loan is costly and you'd still have a healthy buffer afterwards, clearing it saves real money. Check any early-settlement terms and the interest saved on the true-cost calculator.

When the buffer wins

If repaying would leave reserves dangerously thin, keep the cushion. A cash buffer that lets you survive a shock is often worth more than the interest saved — see how to build a cash buffer.

What it means for you

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online when the numbers work.

Frequently asked questions

Should I repay a loan early or keep cash in reserve?

Repay early when the loan is expensive and you'd still hold a healthy buffer afterwards. Keep the cash when repaying would leave your reserves too thin to absorb a shock.

Is there a penalty for repaying a business loan early?

It depends on the terms — some facilities allow early settlement with little or no penalty. Check before you decide, and weigh any fee against the interest you'd save.