Paying Off a Bank Loan Early

[Username2]

The team I am managing has a bank loan of 70m that ends in 30 years and right now I have a bank balance of 160m. Are bank loans ever paid off early except for takeovers?

[PTom88]

They used to be...it happened to me in FM11 with Arsenal.

The financial situation was so good that in 2 consecutive years the board decided to end with the 4 pending bank loans. IIRC 8-10 years before they were due.

[FrazT]

If you are financially strong, the board may pay back any outstanding loans early, but I don't think that you, as the Manager, can do anything to decide when it is done.

[mrdanbartlett]

Very very rarely seem this happen. Usually the board prefer to take massive dividends each season rather than pay off debt.

[QWERTYOP]

If you are financially strong, the board may pay back any outstanding loans early, but I don't think that you, as the Manager, can do anything to decide when it is done.

I think the most you should be able to do is suggest it to the board. They should still be quite within their rights to say no though. I know it can happen when you sell players due to the financial situation at the club - I was at Galatasaray who were peeing money away month on month & I eventually agreed to sell Wesley S to Man City for 20M to put the club back into the black. However, a little while later, money was put into the club and we returned to a healthy state, so I went to the board & asked them to cancel the WS transfer (which hadn't gone through yet) and they did.

Handy.

[sjm]

Is there any reason you want to pay back the loan? It doesn't make any financial sense to do so, particularly in FM, but generally IRL too.

[D0bi]

Is there any reason you want to pay back the loan? It doesn't make any financial sense to do so, particularly in FM, but generally IRL too.

It can make financial sense in reality, by paying off the loan early you stop the loan from accruing interest, potentially saving you money. It is rare though.

[sjm]

It can make financial sense in reality, by paying off the loan early you stop the loan from accruing interest, potentially saving you money. It is rare though.

But that is under the assumption that you can't make more ROI than the interest rate. If you have a loan at say, 8% interest, it's only worth paying off the loan if you can't generate more than 8% profit on the money. But if that's the case, you're probably in trouble anyway and won't be able to pay back the full loan (i.e. how are you going to pay back the loan if you aren't making enough to pay back the loan..?).

In FM, it's really, really easy to make profits of investment in the realms of several thousand percent. Basically, by buying a player at a low value (a few k), and selling him at a high value (a few M). You'd be daft not to be able to make more money this way than the loan interest, hence it making no financial sense to pay off the loan early. That's why money in your pocket now is always worth more than the same money in your pocket later - unless you're suffering deflation, which isn't common.

Of course I appreciate that at some point, your bank balance is so high, that it becomes irrelevant financially and there's no way you could claim that signing 100 talented youths is realistic. It's just a pretty common misconception that it's better to pay off the loan early from a financial perspective, when it's generally better to invest the money for a higher ROI than your interest rate (which is hopefully what you planned on doing with the loan in the first place, if you're a business).