Should I Pay off Auto Loan?

Anonymous · ‎10-15-2015

Hey guys,

I still have 12k on my auto loan original amount of 15k. The only reason I got the auto loan was because I wanted to build my credit. This was the first loan that I have ever gotten on my name. It has been open since Feb. The loan is for 48 months. Should I just pay off the loan right now? or should I wait another 4-6 months? I am paying 3.8% interest.

Thanks,

Anonymous · ‎10-17-2015

@Anonymous wrote:
Hey guys,

I still have 12k on my auto loan original amount of 15k. The only reason I got the auto loan was because I wanted to build my credit. This was the first loan that I have ever gotten on my name. It has been open since Feb. The loan is for 48 months. Should I just pay off the loan right now? or should I wait another 4-6 months? I am paying 3.8% interest.

Thanks,

I am not clear on what your objective is to pay the loan off early. The 3.8 interest is pretty good, especially for a first auto loan.

If you want to build your credit, you do that over time by showing you make full payments and early, or at least on time. It isnt just a 9 month shot.

I would recommend letting it run for a good length of time, unless you need to free up the money, or decrease your DTI, like for a mortgage app.

Your installment loan is contributing to the credit mix portion of the Fico scoring model as well as your history and will bolster your scores.

Do you have at least 3 CCs now? That is another essential part of establishing a good credit profile and score. It doesnt matter what the amounts are, just that they are in good standing and report to all 3 CRBs. After you are established, you can go for higher CLs.

HTH

fury1995 · ‎10-18-2015

@Anonymous wrote:
Hey guys,

I still have 12k on my auto loan original amount of 15k. The only reason I got the auto loan was because I wanted to build my credit. This was the first loan that I have ever gotten on my name. It has been open since Feb. The loan is for 48 months. Should I just pay off the loan right now? or should I wait another 4-6 months? I am paying 3.8% interest.

Thanks,

Installment loans have a better affect on your score when more than 12 months of payment history reports. Your rate of 3.8% is very good for a first time buyer. Auto loans are fixed APR loans so the total interest is far less than the same amount owed on most any other debts. If you have other monthly obligations, put your money towards those for now and let the installment loan report open a little longer.

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juniornj23 · ‎10-20-2015

I've been there and the best you can do is pay more than your payment due and take a least a year to pay off. That will show a good payment history

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Anonymous · ‎10-23-2015

How much does having a CLOSED auto loan help? I know you take a hit when your pay off your last installment loan, but how much better off are you with a closed installment loan vs none at all?

Assuming otherwise good history with revolvers.