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Auto Payoff

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Anonymous
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Auto Payoff

Good morning folks, My wife and I are working on buying a home sometime around June of '10, and we're looking at our debt. We currently expect to have our CC debt down to $0 by September of this year, with only Student Loans and the Nissan bill left. We don't expect to pay off the loans before we get the house (the downside of a private education), but we're going back and forth on whether we should pay off the car. We are one year into a six year car loan. We have about $28k left on the loan, and it's at 10.45%. We now have the income to pay off the loan around May of '09, but we don't want to kill our Fico score. What would you recommend? Pay it off early and save a ton on interest, do we pay off a lot of it, but keep enough on the bill so that we can string it out until we get the house, or do we just keep paying it as if we didn't have the extra cash? Thanks! Ryan
Message 1 of 5
4 REPLIES 4
Schoolbuskid
Valued Contributor

Re: Auto Payoff

I would make a nice lump sum payment towards the loan and then continue to make the monthly payment...you will need the history for the loan...because as you know the longer accounts are open the better!
 
 
Rebuilding and Reducing Debt, is my game plan.
Message 2 of 5
WhirledPeasPlease
Moderator Emeritus

Re: Auto Payoff

Hi Iknowyoudo, errr..  I knowdoyou
 
I'd get rid of the auto loan and leave the boring SLs just as they are.  You can deduct SL interest and SLs have a very small effect on scoring (as long as they're neat and tidy).
 
You will still have at least one installment loan showing on your report once the car is PIF, so you won't take a hit for losing the credit-type mix. 
 
Just consider the money you'll save in interest as more money you can apply toward a down payment on the house.
 
Good job on planning ahead for the home loan!  And remember, a general rule of thumb is no new accts for at least 6 months prior to closing on the house. 
 
(Edited to fix OP's name)


Message Edited by WhirledPeasPlease on 06-28-2008 01:50 PM
~*~*~*~*~*~*~*~*~*~*~
From 700 in 2008 to 498 in 2012...
4/23/12 -- BK 13 date of filing EQ = 505
4/18/12 -- EQ 498
12/5/13 -- EQ 669
Here we go.... back on track.
Message 3 of 5
Anonymous
Not applicable

Re: Auto Payoff

Perfect. So, just to confirm, as long as I have one installment-based account that is open, the credit-mix is good? I certainly won't get the student loan closed before the house is purchased, but it would be the only installment-based loan that would remain once the car is paid. If I need to keep the car note open until the house is purchased, that's fine, but even with paying off a large chunk and keeping it open for the next two years, I'd still burn through ~$900 worth of interest... Thanks again, Ryan
Message 4 of 5
WhirledPeasPlease
Moderator Emeritus

Re: Auto Payoff

Hi Ryan,
 
Sorry it took a little while to get back to you -- I wanted to ask around a bit to make sure I had my head wrapped around everything.  It looks like you're good to pay off the car early and leave the SLs where they are.
 
I know we often come across as totally score driven, but there really is something to be said for saving money in the process -- you just have to temper good financial sense with good fico sense.  Smiley Happy
 
Now for the really good news -- those SLs aren't really a big factor in scoring.  Recently Sallie Mae 'lost' my nearly 60k in SLs (on Experian only) with a total of two 90 day lates from April '05 and my score change was a whopping +9 points.  When you compare that with what I gained from losing an erroneous 2nd car lease/loan (about +20 points) for 23k, that's a big deal!
 
Good luck Ryan!  (Oh, and welcome to the forums!)
~*~*~*~*~*~*~*~*~*~*~
From 700 in 2008 to 498 in 2012...
4/23/12 -- BK 13 date of filing EQ = 505
4/18/12 -- EQ 498
12/5/13 -- EQ 669
Here we go.... back on track.
Message 5 of 5
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