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Keeping a Car Loan Open Longer than Needed

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Anonymous
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Keeping a Car Loan Open Longer than Needed

In January 2017 I opened an $8700 car loan to be repaid over 5 years. Well I just made a payment and my remaining balance is ~$13. So I'm prepaid for about the next 4 years. Would it be wise to just let this loan sit so I have a longer AAoA now and in the future? Or should I just pay it off now and close the account? This is also my only installment loan so I'm worried about a drop in my credit score if this account closes.
Message 1 of 6
5 REPLIES 5
Anonymous
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Re: Keeping a Car Loan Open Longer than Needed

Are you sure the terms of the loan allow you to "skip payments" if you paid ahead?  Will any interest accrue other than the amount on the $13 balance?

 

My car loans in the past never let me pay ahead and stop making monthly payments without original balance interest accruing the entire time.

Message 2 of 6
Anonymous
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Re: Keeping a Car Loan Open Longer than Needed

I haven't actually read the terms. Should probably do that first. But below are the answers to your questions based on my experience so far.

I've skipped months before so I guess so. When I get a monthly statement I've had $0.00 as my amount owed every month since my first payment (the first payment was way more than I needed to make so I was paid ahead from the start).

The monthly interest I incurred also went down as I paid more. When my balance was ~$600 I paid $3 in interest and when my balance was ~$300 I paid $1.50 in interest.
Message 3 of 6
pipeguy
Senior Contributor

Re: Keeping a Car Loan Open Longer than Needed


@Anonymous wrote:

Are you sure the terms of the loan allow you to "skip payments" if you paid ahead?  Will any interest accrue other than the amount on the $13 balance?

 

My car loans in the past never let me pay ahead and stop making monthly payments without original balance interest accruing the entire time.


I know NFCU allows you to "pay ahead" on a car loan and I believe I used to do this will Ally on GM cars - I think DCU will allow that too.

 

We purchased a $6k car for our adult child last Spring and used NFCU - he's a member are are we, but our credit is much (!) better. Very low APR and the payments are only $177 a month. He gives us $1000 every 6 months, we "pay ahead" his car payment, one the car is paid for we'll transfer it to him (it's in my wife's name and his). With NFCU when we make the payment, we state it is for the next 6 payments - no problem. 

 

With Ally, I think I just paid the next bill (it's all online) as a separate payment, 2 months, 3 months, whatever - I usually run 1 or 2 months ahead on my car payments - just easier for never being late. 

 

Message 4 of 6
Anonymous
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Re: Keeping a Car Loan Open Longer than Needed

Figured I'd give an update incase anyone is interested. I called in and found out that my balance of $12.91 isn't due until May 2021. Since this is my only installment loan I think I'll leave it open to help my credit score. Confirmed that my interest should be between $.01 and $.02 cents per day which I don't mind paying.
Message 5 of 6
Anonymous
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Re: Keeping a Car Loan Open Longer than Needed


wrote:
Figured I'd give an update incase anyone is interested. I called in and found out that my balance of $12.91 isn't due until May 2021. Since this is my only installment loan I think I'll leave it open to help my credit score. Confirmed that my interest should be between $.01 and $.02 cents per day which I don't mind paying.

That is awesome they allow this. Most car loans don’t. Take full advantage. Enjoy. 

Message 6 of 6
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