16 Jun 2021, Author:

Whether you have an overdraft at your local bank, a personal loan, or a credit card debt, one thing is for sure, it affects your credit score. The effect could be positive or negative depending on how you handle elements such as repayment, utilisation ratio, and so forth.

Before looking at how you should repay your loan fast without affecting your credit score, you must understand how your credit score is computed.

Every credit reference agency has its formula for calculating the credit score. However, the factors used are almost similar across the board. If for instance, you consider how Experian, one of the main credit scoring agencies in the UK, arrive at the credit score, the following are the factors that bear the most weight.

  • Payment history: When you pay on time without falling behind on any bill, you may receive the biggest boost in your credit score. Payment history comprises 35% of the overall credit score.
  • Amounts owed: This makes up 30% of your credit score. Your debt level determines or predicts your ability to meet future payments as they fall due hence affecting your credit performance.
  • Credit history: This factor is considered moderately influential and accounts for about 15% of your credit score. How responsibly you manage your credit accounts can have a long-term impact on your credit performance.

The other two factors used to determine your score are the credit mix and new credit. Each of which contributes 10% to the score.

How To Pay Your Loan Fast Without Damaging Your Score

There are several tips you can employ to help you pay your debt fast while preserving or even boosting your credit score. This article will highlight the top five loan repayment tips you can implement right away.

Raising Money From Other Sources

Get creative and look for ideas to raise money from other sources to help you in the loan repayment. For instance, you can sell stuff you don’t need such as clothes, small tools and other belongings. You can do this through a garage sale, a consignment shop or by opening a Facebook store or group to help you dispose of the items.

You can also get a side hustle or a seasonal part-time job to generate additional cash to help you pay up your loan. These activities have zero impact on your credit score but they help strengthen your creditworthiness in the eyes of lenders.

Pay Above The Minimum Monthly Payment

The best and recommended way to clear your debt fast is to make payments that amount to more than the minimum payment. This strategy works whether you are repaying student debt, personal loans or credit card debt.

Making such payments will help you speed up the loan repayment but more importantly save you on loan interest. For instance, if you take a £5,000 loan from NatWest at an APR of 7.9% payable within 36 months, the minimum payment will be £155.82. At the end of the loan, you’ll have paid £5,609.67 meaning £609.67 is the interest.

However, if you decide to make £225.29 in monthly payments, you’ll only take only 24 months to repay the loan and the total repayable will be £5,406.92. This is over £200 savings in interest. Furthermore, paying above the minimum amount won’t hurt your score. You only need to ensure that your lender doesn’t charge you prepayment penalties.

Use The Debt Snowball Method To Speed Up Repayments

The debt snowball method is one of the best ways to help you prioritise debt repayment and ensure you build momentum. It works almost the same way as the above strategy only that you first begin by listing all your debts from the smallest to the biggest.

When doing the repayments, you begin by making the minimum payments on all the loans you have and then allocate the excess funds onto the smallest debt on your list. Once you have paid off the smaller debt, go up the hierarchy into the next debt until you finish up repaying all of them.

The advantage of this method is that it will help you pay your debts fast and since you will be meeting the minimum payment, your credit score won’t be hurt.

Reorganise Your Budget

When paying off debt, you need to free up as much money as possible. There are two ways to do this, boosting your income or cutting your expenses. The budget reorganisation approach leans towards cutting or minimising your expenses.

Costs such as digital entertainment and eating out should be reduced to a bare minimum. Instead of paying for the topmost Hulu or Netflix packages, consider dropping to the minimum package and save the extra money.

Your bare-bones budget will be different from your peers but that shouldn’t worry you. As long as you are making real savings, it is worth the sacrifice. Any extra cash you realise out of the budget trimming should go directly to debt repayment.

This strategy not only helps you pay your loan fast but also paints the picture of a responsible person who is on top of their expenses.

Debt Refinancing

As interest rates fall, you need to think about debt refinancing. If the debt you are currently repaying is more expensive than the prevailing rates in the market, refinancing with a much cheaper debt can help you pay your debt faster without affecting your credit score.

As an example, consider a loan of £10,000 at an APR of 15% payable in 36 months. The monthly repayments will be £342.06 and the total amount repayable will be £12,314.07. This means that the interest payable is £2,314.07.

If the rates come down and the APR now comes to 11%, you can refinance the same loan giving you revised monthly repayments of £324.94 and a total amount repayable of £11,697.74. The difference in interest will be £616.33 thanks to refinancing.

If you have bad credit and can not be approved for mainstream bank loans, you can opt for unsecured loans of up to £25,000 to help you refinance.


Paying your loan fast is beneficial both in terms of increasing your credit utilisation ratio and minimising the interest you pay on loans. However, to ensure that you pay your loan fast without hurting your credit score, you need to have tried and tested tips and strategies to guide you. The tips shared here can go a long way into ensuring that you have the right footing as you begin your loan repayment journey.