Is it worth paying off a personal loan when inflation is rising?

Mr_owl

Hello.

As the title says. Is it worth paying off a loan early? A smallish loan I must add. Around £3500 left. As far as I am aware I am qualified for cash back offer if the loan is not settled earlier. However if inflation is so high and looks like it hasn't stopped climbing the debt effectively shrinks in terms of real value. Any thoughts?

[Deleted User]

Is the loan a fixed APR? Do you have the cash to pay it off and save interest vs the "real value" shrinking? Are you going to increase your income to match the general increases in cost?

To me, as a complete layman, the effect of inflation on the value of the debt isn't really something you can quantify vs what you'd save in interest particularly given savings are being eaten away in real value at the same time.

Mr_owl

Yes it is fixed and I could pay it off. I checked settlement figure. It is £3275 and I am eligible for cashback of £114 but I am not sure if I will lose it as I am getting interest refund of £119. My understanding is that cash back is paid at the end of full term but I am struggling to find the small print to double check what happens if the loan is settled early.

[Deleted User]

You could try the trick of paying all but 2 months worth off, then allow the last couple to go through to clear the loan - saves interest and you might still get the cashback