Pay off short term loans early: a broker’s guide to successful strategies

Short term loans are all about seizing the right opportunity at the right moment. But what happens when your client wants to repay early?

Knowing how to guide clients through early repayment of a bridging loan can help unlock financial flexibility, reduce overall costs, and improve client outcomes. In this article, we’ll explore the advantages and potential drawbacks of repaying short term loans early, plus offer a few smart strategies that brokers can use to support clients on this path.

Understanding how to pay off short term loans early can help ensure repayment plans are structured in a way that works for everyone involved, and helps avoid any hidden surprises later on.

Why early repayment can be a smart move

For many borrowers, early repayment is a sign that things are going to plan, or even better than expected. Perhaps a property sale has completed ahead of schedule, a refinancing deal has progressed smoothly, or an exit strategy has been executed faster than anticipated. Whatever the reason, settling a bridging loan early can offer some welcome advantages. It could significantly reduce the overall interest paid, especially since most bridging loans accrue interest on a monthly basis. This, in turn, can free up capital for future projects or investments, giving your client greater financial flexibility at a crucial moment.

It can also help provide peace of mind. With one less financial commitment to worry about, clients may find their broader finances become easier to manage. However, not all bridging loans are created equal when it comes to early repayment. Our Alternative Bridging Corporation bridging loan team offers more flexible terms that allow early settlement without harsh penalties or rigid minimum terms. But policies vary from lender to lender, so it’s always important to review the details upfront and make sure any repayment plans align with your client’s circumstances and goals.

Three smart strategies for paying off short term loans early

Helping your clients repay early starts with how the loan is structured. A few small changes upfront can help make a big difference down the line.

1. Negotiate flexible terms upfront

Some bridging lenders allow early repayment with reduced interest, but others may have a minimum term. Always review the repayment terms before the deal completes. Products like the Alternative Overdraft offer extra flexibility for more fluid repayment needs.

2. Encourage bi-weekly payments

Although not always common with bridging loans, encouraging clients to think in terms of regular cash flow and shorter repayment intervals, even when repaying in lump sums, can help bring more control over timelines.

3. Use windfalls or seasonal surpluses

If your client receives a cash injection from a sale, bonus, or seasonal uplift, this can be used to clear the loan faster. Lenders like ABC can help facilitate faster drawdowns and repayments where needed.

Things to watch out for

While the advantages of early repayment are clear, it’s not without its potential downsides. Some lenders apply early repayment charges or enforce minimum interest periods, meaning your client could end up paying more than expected even if they settle early. In other cases, interest may be structured to be paid upfront or calculated in a way that doesn’t favour early repayment, so understanding the fine print is essential.

There’s also the risk that clients tie up too much liquidity in their bid to repay early, only to face cash flow issues later down the line. As a broker, helping clients weigh these risks and consider how repayment terms align with their overall plans is key.

Flexible bridging loans that work around your clients

At Alternative Bridging Corporation, we understand that circumstances change and that flexibility matters just as much as speed. That’s why many of our bridging loan products come with clear, fair repayment terms designed to suit a range of exit strategies. We also offer solutions like our business finance range, term loans, and the Alternative Overdraft, each built to give your clients the control they need, when they need it.

Potential checklist: early repayment planning

• Have you checked the loan’s early repayment policy?
• Is there a minimum interest period or charge?
• Could your client’s situation change mid-term?
• Do they have a clear exit plan?
• Is flexibility more valuable than the lowest rate?

Helping your clients stay in control

Whether your client is looking to repay early or just wants a bit of breathing room, structuring short term loans around their needs is key. As a broker, your advice could make all the difference between a rigid finance solution and one that truly supports the client’s goals. Want to explore our flexible repayment options? Get in touch or speak to one of our team about how we can help structure short term loans with early repayment in mind on 0208 349 5190.