The money is reported to have been paid by a group of fans and will see the Bank of Scotland release a security over the club's assets.
United have almost halved their debt in recent years but have still been paying annual bank interest fees of more than £200,000.
The club announced the major financial restructuring had enabled them to "reach a settlement with its bankers, Bank of Scotland, to close off its debt position".
In a statement, Dundee United chairman Stephen Thompson added: "In recent years we have worked closely with the bank to reduce our term loan debt by almost half, from a peak of £6million to just over £3million today, whilst at the same time continuing to trade and operate the business as normal in a highly competitive and difficult market.
"At times this has been challenging, but we have risen to this challenge and are now in a position whereby we feel able to operate the business without any further reliance on bank lending.
"The bank has been fully supportive of our position and has co-operated fully with our request to discharge the debt and release the standard security held over the club's property.
"Importantly, this restructuring will also allow us to utilise the club's assets to a greater extent for the benefit of the local community and we will be providing details of our plans for this over the coming weeks."