Pros and Cons of Early and Medium Loan Repayment

Medium Loan Repayment

Having settled a loan has its own benefits and drawbacks. Ever since small, the ideology of getting a loan or being in debt is told to be avoided at all costs. However, as we grow up in life, there comes unavoidable expenses that we simply cannot ignore. From financing higher education to purchasing your dream car or home or even to have your dream wedding are expenses that you simply cannot put behind without the help of a loan. Let’s see to the pros and cons of early and medium loan repayment.

Medium loan repayment

A medium-term loan is a loan issued by a bank or other credit institution for a specified period, usually from one to three (sometimes up to five years) to an individual or legal entity. This type of loan differs in different countries. Somewhere the maximum term is 3 – 5 years, in others it can be up to 7-10 years. In some states, there is no medium-term loan at all, there is only short-term (up to a year inclusive) and long-term (over one year).

Medium loan most often include:

  • Investments (loans to enterprises from commercial banks for the expansion of production, reconstruction, re-equipment, modernization, purchase of equipment …);
  • Leasing (long-term lease of transport, equipment, real estate with the possibility of redemption at the residual value);
  • Long-term online loans Sri Lanka;
  • Car loans (especially concessional);
  • Some home loans, with a high interest rate and preferential terms;
  • Education loans;
  • For repairs, construction, for medicines and services;
  • International loans.
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Pros of settling loans early

Settling loans early is a dream for many people, but it comes with its own set of pros and cons.

  1. Freedom from Debt – there is no great feeling as being free from debt, it simply takes the headache away from having to settle your loan from a busy month or thinking about leaving an unpleasant job
  2. Strengthen your Credit History – settling your loans in full means that you do not have to worry about paying up every month further, this will help you in strengthen your credit history as you will not default payments no more
  3. Frees Up Credit – You will now have access to more credit once your loan payments are settled in full. You can utilize it to a different project of your own

Cons of settling debt early

  1. You may be Penalized – settling a loan means you will have to pay a penalty upfront, you cannot forgo this as this is a practice everywhere in the market
  2. You may be taking out your savings to do so – the only source of income to settle your loan will be our savings, by using it you will no longer have savings for a rainy day

However if you are having borrowings from your colleagues, friends or family and need to settle these short term borrowings at an instant, online loans can help. You can simply google Online Loans Sri Lanka which will give you a variety of options to choose from.


Being between short-term (when collateral is rarely required) and long-term (which is almost always characterized by collateral), a medium-term loan more often, of course, involves guarantees of repayment.

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An important role in the issuance of such loans is played by the credit history, as well as the reputation of the borrower’s solvency. The period for consideration of applications for a medium-term loan is usually longer than for a short-term one. However, its advantage will be that it is more profitable than a loan for a short period.

Lending conditions are often unique in nature, depending on the security, the borrower’s solvency, the purpose of the loan and other factors that somehow affect the credit risk.

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