What will happen if i pay my auto loan off way early?

[linux007969]

What will happen if i pay my auto loan off way early?

My auto loan with PNC is for $20,038.75

My min payment is $357.69

Term 60 months

Interest rate 2.69%

I have been making some large payments a few times of $600 and $700 to knock it down and then sticking to around $425 a month, when i put everything into quicken it told me my loan pay off would be July 2019, now with my payments its down to $16,300.22 and its only been like 8 months and quicken now predicts my pay off date would be August 2018 assuming min payments.

So while i want to knock down my balance quickly to avoid large amounts of interest over the life of the loan, could paying it off too soon sink my fico score since its a loan rather than a credit card?

[MarineVietVet]

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@linux007969 wrote:

What will happen if i pay my auto loan off way early?

My auto loan with PNC is for $20,038.75

My min payment is $357.69

Term 60 months

Interest rate 2.69%

I have been making some large payments a few times of $600 and $700 to knock it down and then sticking to around $425 a month, when i put everything into quicken it told me my loan pay off would be July 2019, now with my payments its down to $16,300.22 and its only been like 8 months and quicken now predicts my pay off date would be August 2018 assuming min payments.

So while i want to knock down my balance quickly to avoid large amounts of interest over the life of the loan, could paying it off too soon sink my fico score since its a loan rather than a credit card?

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There are differing opinions on this and they're all valid but my view is to pay debt off as fast as I can.

Being debt free is always my #1 goal with scoring a distant second.

Just my 2 cents.

[Anonymous]

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@MarineVietVet wrote:

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@linux007969 wrote:

What will happen if i pay my auto loan off way early?

My auto loan with PNC is for $20,038.75

My min payment is $357.69

Term 60 months

Interest rate 2.69%

I have been making some large payments a few times of $600 and $700 to knock it down and then sticking to around $425 a month, when i put everything into quicken it told me my loan pay off would be July 2019, now with my payments its down to $16,300.22 and its only been like 8 months and quicken now predicts my pay off date would be August 2018 assuming min payments.

So while i want to knock down my balance quickly to avoid large amounts of interest over the life of the loan, could paying it off too soon sink my fico score since its a loan rather than a credit card?

---

There are differing opinions on this and they're all valid but my view is to pay debt off as fast as I can.

Being debt free is always my #1 goal with scoring a distant second.

Just my 2 cents.

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While this goes against what many here tout (and correctly) on maxmizing FICO scores I subscribe to this.  I just took a new auto loan and will pay on it for 12 months and come month 13 will just pay it off. 

[TRC_WA]

I don't mind being in debt as I am still in credit rebuild mode for the next year til my BK13 falls off.

Getting shafted by interest is something I do mind however...  My car loan is 4.49% which isn't bad considering I got a $40k vehicle for $0 down with my credit profile in the upper 600's.  To me it didn't make much sense to put $5k down on a new vehicle to save $50 a month in payments.  I'd rather get GAP insurance and keep the $5k.

I plan to refi next year when my reports are clean.

As far as CC's go the vast majority of my revolving debt is 0% 18-24 month promotions... again, I don't mind as long as I'm not getting shafted by interest.

OP's car loan is a matter of preference... pay it off and save some interest or continue with the payments at a cost of 2.69% while keeping a cash reserve.  It sure is nice to have low APR car financing eh?  I love the fact that 88% of my monthly payment is going to principal.

Just remember installment loans don't have nearly the effect on your score that revolving CC's do... so paying off your loan (if it's your only one) could actually tank your score.

[linux007969]

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@TRC_WA wrote:

I don't mind being in debt as I am still in credit rebuild mode for the next year til my BK13 falls off.

Getting shafted by interest is something I do mind however...  My car loan is 4.49% which isn't bad considering I got a $40k vehicle for $0 down with my credit profile in the upper 600's.  To me it didn't make much sense to put $5k down on a new vehicle to save $50 a month in payments.  I'd rather get GAP insurance and keep the $5k.

I plan to refi next year when my reports are clean.

As far as CC's go the vast majority of my revolving debt is 0% 18-24 month promotions... again, I don't mind as long as I'm not getting shafted by interest.

OP's car loan is a matter of preference... pay it off and save some interest or continue with the payments at a cost of 2.69% while keeping a cash reserve.  It sure is nice to have low APR car financing eh?  I love the fact that 88% of my monthly payment is going to principal.

Just remember installment loans don't have nearly the effect on your score that revolving CC's do... so paying off your loan (if it's your only one) could actually tank your score.

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That's what i was looking for to see if someone knew if paying off early would hurt me.

I do feel paying it off quicker will save me money which is good since i don't make a whole lot of money. Also i see it as being able to lower my loan balance at a quick rate so the credit card companies don't freak out and think i'm over extended.

So my plan would be to make some more random payments of $600 and $700 and then just go back to a slow and stead pace of $425 a month and i should have it paid off in no time flat without tanking my score a whole lot!

[TRC_WA]

Sounds like a good plan.  As said it's just a matter of preference.

Your scores will be higher with a current installment loan... which is why I said paying it off can tank your score.  In my case it doesn't matter... I have installment student loans in addition to my car.