Can You Pay Off Opp Loan Early? Impact on Your Credit Score

Can you pay off opp loan early? The straightforward answer is yes, absolutely. OppLoans allows borrowers to repay their personal installment loans ahead of the scheduled term. Crucially, OppLoans stands out by explicitly stating they do not charge any prepayment penalties or fees for doing so.  

This policy is particularly significant because Opp Loans typically carry very high annual percentage rates (APRs), often exceeding 160%. The absence of a penalty, combined with these high rates, creates a strong financial incentive to pay the loan off early if possible, potentially saving a substantial amount on interest charges. This article explores the benefits of early repayment, details how to make extra or full payments, and discusses important factors to consider, including the potential impact on credit scores.

Why Pay Your Opp Loan Off Early? The Financial Benefits

Deciding to pay off an Opp Loan ahead of schedule offers several compelling financial advantages, primarily driven by the nature of these high-cost loans.

Significant Interest Savings

The most impactful benefit is reducing the total amount of interest paid over the loan's life. OppLoans are known for their high APRs, sometimes ranging from 160% to 195% or even higher. Because interest accrues on the outstanding balance, paying the loan down faster means less interest accumulates.  

Even paying off the loan just a few months early can result in considerable savings compared to making only the minimum payments for the full term, especially when contrasted with lower-interest forms of credit. While Opp Loans position themselves as an alternative to potentially even higher-cost payday loans, their rates remain significantly elevated.  

Achieve Debt Freedom Faster

Eliminating a loan ahead of schedule means becoming debt-free sooner. This can alleviate financial stress and free up mental energy previously dedicated to managing that debt. Once the loan is paid off, the money previously allocated to the monthly payment becomes available for other financial goals, such as building an emergency fund, saving for the future, or addressing other outstanding debts.

Improve Your Debt-to-Income (DTI) Ratio

Your DTI ratio compares your total monthly debt obligations to your gross monthly income. Paying off an OppLoan completely removes that monthly payment from the calculation, thereby lowering your DTI ratio.  

A lower DTI is generally viewed favorably by lenders, as it suggests a better capacity to handle new debt. This can improve the chances of qualifying for future credit, such as mortgages or auto loans, and potentially help secure more favorable interest rates on that future borrowing. For individuals aiming to transition from high-cost credit products like Opp Loans towards more mainstream financial options, demonstrating an improved DTI can be a particularly valuable step, potentially outweighing concerns about minor, temporary credit score fluctuations.

How to Pay Off Your Opp Loan Ahead of Schedule

OppLoans provides flexibility for borrowers wishing to accelerate their repayment. Borrowers can make additional payments towards their principal balance or pay off the entire loan amount at any point during the loan term without incurring penalties.

Available Payment Methods

Here are the methods available for making early or extra payments:

1. Online Portal (ACH or Debit Card): Borrowers can log into their secure OppLoans customer account online. From the portal, payments can be made using a saved bank account via ACH (Automated Clearing House) or with a debit card. One-time payments are straightforward. While debit card payments are typically applied the same day, ACH transfers may take longer to process. It's important to allow at least two business days for any changes or cancellations to scheduled electronic payments.  
2. Mail-in Check: Additional payments can be made by sending a paper check. Checks should be made payable to "OppLoans" and mailed to their designated P.O. Box: OppLoans, P.O. Box 5040, Fredericksburg, VA 22403. Crucially, borrowers must account for mailing and processing time. Checks need to be received by OppLoans by the payment date, and processing can take an additional 7-10 business days after receipt.  
3. Phone Payment (Debit Card): Borrowers can also make payments or potentially set up recurring extra payments using a debit card by calling OppLoans customer service. The dedicated number for payment-related inquiries appears to be (855) 408-5000. As with online payments, allow two business days for cancellations.  

Important Note on Scheduled Payments

It is critical to understand that making an extra payment or a partial early payment does not automatically change or cancel your regularly scheduled loan payments. Unless the loan is paid off in its entirety, the borrower is still obligated to make their next scheduled payment on its due date. Extra payments work by reducing the principal balance faster, which shortens the overall loan duration and decreases the total interest paid, but they do not alter the existing payment schedule agreed upon in the loan documents.  

For obtaining the exact payoff amount or clarifying any questions about early repayment, contacting Opp Loans directly is recommended. Customer service can be reached via phone at (855) 408-5000 or potentially through email at payments@opploans.com.

Making Extra Payments vs. Full Payoff

Borrowers have two main strategies for paying off their OppLoan early:

Consistent Extra Payments

This involves regularly paying more than the required minimum monthly payment. Each extra amount goes towards reducing the principal balance faster than scheduled. Over time, this shortens the loan term and significantly reduces the total interest paid. This is a practical approach for those who cannot afford a large lump-sum payment but can consistently allocate extra funds towards the loan.

Lump-Sum Payoff

This strategy involves paying the entire remaining loan balance in a single payment. This method provides the maximum interest savings because it stops interest accrual immediately. However, it requires having the full outstanding balance readily available.  

Both methods result in paying less interest compared to sticking to the original payment schedule. The optimal choice depends entirely on the borrower's individual financial situation and cash flow – whether a large sum is accessible or if smaller, consistent extra payments are more feasible.

Will Paying Off My OppLoan Early Hurt My Credit Score?

A common concern when considering early loan repayment is the potential impact on credit scores. Understanding how OppLoans interacts with credit reporting agencies is key.

OppLoans and Credit Reporting

OppLoans reports borrowers' payment history to the three major credit bureaus: Experian, Equifax, and TransUnion. Consistent, on-time payments throughout the loan term can positively contribute to building or improving credit history, a benefit OppLoans highlights. It's also worth noting that applying for an OppLoan typically involves only a soft credit inquiry, which does not impact FICO credit scores.

Why Early Payoff Might Temporarily Lower Scores

However, paying off any installment loan early, including an OppLoan, can sometimes lead to a slight, temporary dip in credit scores. This seemingly counterintuitive effect can occur for a few reasons based on how credit scoring models work:  

• Reduced Credit Mix: Credit scoring models like FICO consider the variety of credit accounts a person manages (e.g., credit cards, installment loans, mortgages). This "credit mix" accounts for about 10% of a FICO score. If the OppLoan was the borrower's only active installment loan, paying it off reduces the diversity of their open credit lines, which can cause a minor score decrease. Lenders generally like to see evidence of responsible management across different types of credit.  
• Closed Account Impact: Scoring models may give more weight to open, active accounts as indicators of current credit management. When an OppLoan is paid off, the account is reported as closed on the credit report. While the positive payment history remains, the account is no longer active.  
• Shorter Account History (Specific Loan): Paying off a loan early shortens the active reporting period for that specific account. While the closed account stays on the report for years (positive information typically for up to 10 years ), closing it sooner slightly reduces the average age of open accounts and the duration of active history for that particular tradeline.

Putting the Credit Score Impact in Perspective

It's crucial to put this potential impact into perspective. Any score decrease resulting from early payoff is typically small and temporary. Scores often recover within a few months, assuming other credit accounts are managed responsibly. The positive payment history established before the payoff continues to benefit the credit report for years.  

Ultimately, the decision involves weighing the definite, often substantial, interest savings achieved by paying off a high-APR OppLoan early against the possibility of a minor, short-term dip in credit score. For borrowers actively using the OppLoan specifically as a tool to build credit history (as OppLoans suggests is possible ), paying it off very early does end the stream of new positive payment reporting for that specific loan. While the past good payments are recorded, closing the account sooner means a shorter duration of active credit-building activity from that particular loan, potentially slowing the building process compared to carrying the loan longer (and paying more interest).  

Things to Consider Before Paying Off Early

Before committing extra funds to pay off an OppLoan early, it's wise to assess the broader financial picture.

Check for Higher-Interest Debt

Evaluate all outstanding debts. Are there credit cards or other loans with APRs even higher than the OppLoan?. From a purely cost-saving perspective, it usually makes more sense to direct extra funds towards paying down the debt with the absolute highest interest rate first, as this saves the most money overall. Often, this might be credit card debt.  

Maintain an Emergency Fund

Financial experts strongly recommend having an emergency fund covering 3-6 months of essential living expenses. This fund acts as a crucial safety net for unexpected events like job loss, medical bills, or urgent repairs – the very reasons some individuals seek loans like OppLoans in the first place. Avoid depleting savings entirely just to pay off the loan early. Without an adequate emergency fund, an unexpected expense could force a borrower back into high-cost debt, potentially restarting a difficult cycle. This standard financial advice carries extra weight for those utilizing higher-cost credit options.

Upcoming Major Loan Applications

Consider the timing if planning to apply for a significant loan, like a mortgage or auto loan, in the very near future. While paying off the OppLoan improves the DTI ratio (a positive for lenders), the potential for a small, temporary credit score dip might be undesirable right before a major credit application. In such cases, it might be strategically better to wait until after the new loan is approved and funded before paying off the OppLoan.

Weigh the Pros and Cons for Your Situation

The decision boils down to a personal assessment. Balance the guaranteed interest savings and faster debt freedom against the potential for a temporary, minor credit score dip. Factor in the status of other debts, the health of the emergency fund, and near-term financial goals. The fact that OppLoans does not charge prepayment penalties simplifies the cost-benefit analysis significantly.

Conclusion

Paying off an OppLoan early is not only possible but also actively facilitated by OppLoans through their policy of charging no prepayment fees. The primary advantages are substantial savings on interest due to OppLoans' high APRs, achieving debt freedom sooner, and improving the debt-to-income ratio, which can aid future borrowing efforts.  

The main factor to weigh against these benefits is the potential for a minor and temporary decrease in credit score, primarily due to changes in credit mix and account status. However, the long-term financial health benefits of eliminating high-cost debt often outweigh this temporary fluctuation for many borrowers.  

Before proceeding, assess other higher-interest debts, ensure an adequate emergency fund remains intact, and consider the timing relative to any major upcoming loan applications. By carefully considering these points and utilizing the payment methods provided by OppLoans, borrowers can make an informed decision about early repayment that aligns with their individual financial circumstances and goals.  

For official confirmation of their policy and specific payment instructions, borrowers can refer to the OppLoans website:

• OppLoans FAQ on Early Repayment: https://www.opploans.com/faqs/can-i-repay-early-or-make-additional-payments/

Frequently Asked Questions