Is it worth paying off a flat-rate loan early?

[collington]

A few years ago I took out a flat-rate loan - one that charged me all the interest up-front and therefore if I pay it off early it is of no financial benefit to me.  (This was before my financial awakening - please don't beat me up!)

I've got four years left on it and I can make extra payments, but as I say, it doesn't reduce the amount of interest (or final amount) I will pay.   As that is the case, it seems to make sense to me to take the amount I would spend on extra payments and put it into something that will EARN me money.  (I could have four years of interest!)

I appreciate your collective wisdom, so I thought I would see if anyone can find a flaw in my plan.    Suggestions/advice?

Thanks!

[arebelspy]

As long as you can pay it off at the end (if a balloon payment, or along the way if it's fully amortized), sure, investing it (even in something that earns a low interest rate) is better than prepaying it.

[Spork]

The only benefit I can see is a possible psychological benefit.  If having the debt for some reason weighs on you, then you pay it for the peace of mind.   If it doesn't bother you, then even crappy less-than-a-percent interest on a savings account is a better return than paying it off early.

Don't be too hard on yourself: I accidentally bit on one of those loans many years ago when I didn't quite understand a salesman.

[collington]

Seems like my thinking was on the right track.  Thanks folks for the reinforcement!

[AlanStache]

Only way I can think paying it off early might make sense is if you were looking to get a home loan and the lender looked at this as debt and charged you a higher interest rate or it was affecting your credit score and hence your home loan rate.  Else yes dollars tomorrow are worth less than dollars today.