Pay Off Auto Loan or Not????

jmpaisley77 · ‎03-12-2014

I have an auto loan, been reporting to my credit reports for 9 months, no missed payments. I want to pay this off completely. My question is, am I better credit score wise to wait til this has reported for one full year and pay it off.......or go ahead and pay it off now?.....or will this have no effect either way? I think I have read in the past where you get a credit score bump each time an account makes it a year reporting? Thanks.

Remember0 · ‎03-13-2014

There might be a small bump if you wait for a year. But if you are paying any sort of high interest, I'd pay it off now. The 1 year bump, if even existant, is NOT large by any means.

Creditaddict · ‎03-13-2014

@jmpaisley77 wrote:
I have an auto loan, been reporting to my credit reports for 9 months, no missed payments. I want to pay this off completely. My question is, am I better credit score wise to wait til this has reported for one full year and pay it off.......or go ahead and pay it off now?.....or will this have no effect either way? I think I have read in the past where you get a credit score bump each time an account makes it a year reporting? Thanks.

I agree with other poster, unless your interest is like 2% or less I wouldn't wait the extra 3 months just to possibly get a score boost which I don't feel has ever really been proven to me is a milestone for reporting loans but I have heard it is.

I dont' see why though considering it will continue to report as paid on time and in full for 10 years so why would you need 12+ months of payments on an open account.

StartingOver10 · ‎03-13-2014

@Remember0 wrote:
There might be a small bump if you wait for a year. But if you are paying any sort of high interest, I'd pay it off now. The 1 year bump, if even existant, is NOT large by any means.

^^^Agree 100%. The first thing is to do the right thing for your finances. If you have the resources to pay it off, why continue to pay interest?

Shock · ‎03-13-2014

This has me wondering. It may vary from lender to lender, it may not. But...

...the remaining balance that I see on my account for Patelco, is that all principal balance, or including interest?

StartingOver10 · ‎03-13-2014

@Shock wrote:
This has me wondering. It may vary from lender to lender, it may not. But...

...the remaining balance that I see on my account for Patelco, is that all principal balance, or including interest?

In a normal auto loan the interest is charged per diem. So what you see is the balance, but not the payoff. So if your payment is due the 10th of each month and you want to pay it off on the 11th, you will have two day's interest (10th and 11th). Take a look at your payments made and the interest allocation - you will see different amounts if you happen to pay on a different day. Did I make sense???? lol...it's in my head but doesn't always come through in a coherent manner.

Shock · ‎03-13-2014

No, I understand that it's per diem...but I'm not sure if that answered my question lol.

Okay, suppose I look at my account and it says: Remaining balance, $3995. I go to the teller and pay 3995 cash. How much of that is interest?

StartingOver10 · ‎03-13-2014

@Shock wrote:
No, I understand that it's per diem...but I'm not sure if that answered my question lol.

Okay, suppose I look at my account and it says: Remaining balance, $3995. I go to the teller and pay 3995 cash. How much of that is interest?

It will be the $3995 plus the per diem interest since your last payment. When you call or email for a payoff quote, the lender will give you the exact figure and how long the amount is valid (typically 10 days). Remember, interest is paid in arrears.

Shock · ‎03-13-2014

I was considering opening a card with 0% interest so I could get my title and pay less in insurance. But I read that if the payout amount and remaining balance is the same, there's no point. Only if the payout amount is less..is this correct?

Remember0 · ‎03-14-2014

No, you still save money in future interest if you move it to a 0%. The payoff amount will always be slightly more than the remaining balance when you ask for a payoff quote.

The future interest which will accrue is not included in remaining balance (because it hasn't accrued yet). If you refi to 0%, this interest will never accrue allowing you to save money. Plus obviously the insurance can be raised to a higher deductible.

The conclusion is you will save money if you were to refi.